49. Types of institutional investors and their role in the global financial markets.

Institutional investors are organizations which pool large sums of money and invest those sums in securities, real property and other investment assets.

Institutional investors have become increasingly important in global capital markets. As of the end of December 2007, total assets under management by major global institutional investors reached US$82 trillion. In comparison, the world equity markets amounted to US$60 trillion in 2007. There are generally six types of institutional investors: mutual funds, pension funds, insurance companies, sovereign funds, hedge funds, and private equity funds. A mutual fund is an investment vehicle that buys a portfolio of securities selected by a professional investment adviser to meet a specified financial goal (investment objective). Between 2000 and 2007, the total net assets of mutual funds doubled. A pension fund is a pool of assets forming an independent legal entity that are bought with the contributions to a pension plan for the exclusive purpose of financing pension plan benefits. A hedge fund is an unregulated pool of money managed by an investment advisor, the hedge fund manager, who typically has the right to have short positions, to borrow, and to make extensive use of derivatives. Hedge fund managers receive both fixed and performance fees. A private equity fund is a pooled investment vehicle which invests its money in equity securities of companies that have not “gone public” (i.e. are not listed on a public exchange). Private equity funds are typically limited partnerships with a fixed term of ten years (often with annual extensions). Institutional investors supply capital for firms seeking to raise finance from both publicly traded securities markets and from the private domain. Given their large portfolio size, institutional investors naturally become dominant holders of publicly traded securities. Currently institutional investors hold over 68% of the total market value of US common stocks. Therefore, their investment behavior will have a significant influence on the pricing of these securities. For corporate managers who raise money from capital markets, it is important to understand the demand structure of institutional investors for publicly traded securities. Most institutional investors benchmark their performance against certain indices, in the US market it is S&P500 Index, the most prevalent equity index. And even prices of those stocks tend to experience a 2–3% increase over a short period of time. Banks, insurance companies, pension funds, and investment grade bond mutual funds place severe restrictions on the holdings of high-yield bonds, whereas hedge funds and high-yield bond mutual funds provide capital for high-yield issuers. Lastly, private equity funds are an important source of capital for entrepreneurial firms.

50. The functions of the international financial organizations (imf, World Bank, bis).

The Bank for International Settlements (BIS) is an international organisation which fosters international monetary and financial cooperation and serves as a bank for central banks.

The BIS fulfils this mandate by acting as:

• a forum to promote discussion and policy analysis among central banks and within the international financial community

• a centre for economic and monetary research

• a prime counterparty for central banks in their financial transactions

• agent or trustee in connection with international financial operations

The head office is in Basel, Switzerland and there are two representative offices: in the Hong Kong Special Administrative Region of the People's Republic of China and in Mexico City.

Established on 17 May 1930, the BIS is the world's oldest international financial organisation.

As its customers are central banks and international organisations, the BIS does not accept deposits from, or provide financial services to, private individuals or corporate entities. Currently more than 5,000 senior executives and officials from central banks and supervisory agencies participate in meetings organised by the BIS every year.

IMF describes itself as "an organization of 184 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty". The primary function of the IMF is to provide financial assistance to countries that experience serious financial difficulties. Member states with balance of payments problems may request loans and/or organizational management of their national economies. In return, the countries are usually required to launch certain reforms. Overall, IMF has $300 billion of loanable funds. This comes from member countries who deposit a certain amount on joining. IMF also produces reports on member countries economies and suggest areas of weakness / possible danger. The idea is to work on crisis prevention by highlighting areas of economic imbalance. Finally, IMF produce many reports and publications. They can also offer support for local economies.

The World Bank Group (WBG) was established in 1944 to rebuild post-World War II Europe under the International Bank for Reconstruction and Development (IBRD). Today, the World Bank functions as an international organization that fights poverty by offering developmental assistance to middle-income and low-income countries. By giving loans and offering advice and training in both the private and public sectors, the World Bank aims to eliminate poverty by helping people help themselves. There are 184 member countries of the WBG. To become a member, however, a country must first join the IMF. The size of the World Bank's shareholders, like that of the IMF's shareholders, depends on the size of a country's economy. Overall, World Bank performs the following functions: (i) Granting reconstruction loans to war devastated countries. (ii) Granting developmental loans to underdeveloped countries. (iii) Providing loans to governments for agriculture, irrigation, power, transport, water supply, educations, health, etc (iv) Providing loans to private concerns for specified projects. (v) Promoting foreign investment by guaranteeing loans provided by other organisations. (vi)Providing technical, economic and monetary advice to member countries for specific projects (vii) Encouraging industrial development of underdeveloped countries by promoting eco¬nomic reforms.

51.(И.Р.)The major functions of international banking: international trade financing, participation in the interbank foreign exchange and eurocurrency markets, international investment banking services, and sovereign lending.