Major stock market investors are generally institutions that trade on behalf of clients, including individuals, or retail investors. Institutions -- such as asset management firms -- have great scale in the stock market for large trades because they combine the assets of multiple investors into one investment vehicle. The average investor cannot replicate the size of investments made by institutions. Extremely wealthy individuals, however, are an exception and can be grouped among the stock market's major investors.
Retirement plans are major stock market investors but scaled back their exposure following the financial crisis of 2008. In 2005, pension funds had 65 percent of plan members' assets directed into the stock market, according to a 2012 article on The New York Times website. In the 20-month period leading up to October 2008, retirement plans experienced $2 trillion in investment-related losses, according to a 2008 article on the "USA Today" website. By 2011, pensions had less than half of assets invested in equities.
Hedge funds, which are alternative asset managers that face lighter regulation in comparison with traditional money managers, such as mutual funds, oversee $2.1 trillion in assets, according to a 2012 report issued by Hedge Fund Research. Of those assets, approximately $586 billion are invested in equity-related strategies. While hedge funds are major stock market investors, they also use a hedging technique known as shorting to produce profits even when the stock market declines.
Major stock market investors are required to file regulatory documents when a position in an individual company's stock reaches a 10 percent threshold. Stock market investors obtain voting rights in major company developments, and an investor with a 10 percent or higher stake can significantly alter the direction of a business. In 2012, activist investor Carl Icahn, who is known for initiating change at companies he invests in, disclosed in filings with the U.S. Securities and Exchange Commission that his ownership stake in technology company Netflix reached 10 percent, according to a 2012 article on The Wall Street Journal website.
In 2005, mutual funds directed more than half of total assets into the stock market, according to the Investment Company Institute. In 2012, during a period of economic uncertainty, investors were withdrawing money from equity mutual funds in favor of safer investment vehicles, such as bond funds, according to a 2012 article on The Washington Post website. In October 2012 alone, investors removed more than $15 billion from stock mutual funds, the article indicated.
- The Wall Street Journal: Netflix Shares Jump on Icahn Disclosure, Stock Trips Circuit Breakers
- The New York Times: Private Pension Plans, Even at Big Companies, May Be Underfunded
- USA Today: $2 Trillion Wiped Out of Retirement Funds
- Hedge Fund Research: Hedge Fund Assets Surge to Record in Third Quarter
- Investment Company Institute: Frequently Asked Questions About Stock Mutual Funds
- The Washington Post: October Mutual Fund Flows: Cash Exits Stock Funds for 8th Month in Row, Bonds Again Add More
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