Pension funds, insurance companies and collective investment schemes are collectively known as “institutional investors”. Institutional investors mobilise the savings of individuals, pool them together and invest them to provide specific outcomes – income in retirement, protection against risks and savings, respectively.
Institutional investors have become major players in the financial markets, with substantial investments in equities and bonds, as well as a wide range of other instruments. They are increasingly important suppliers of investable funds, as they accumulate contributions or premiums over time. Institutional investors thus help to promote the development of capital markets both by helping people to use their savings efficiently and by providing funds to governments and companies who need them to finance deficits or expansion.
In many instances, insurance and pension investments in Africa have been focused mainly on government securities, real estate and bank deposits, with smaller proportions in equities and corporate bonds. One of the factors that often hinder their more sustainable development is the lack of a sufficient depth and breadth of capital markets and the range and number of suitable investments.