investors institutional and Retail different investors have different needs primarily driven by their different time Horizons investors who have near-term cash needs will need to hold more liquid assets with lower volatility.

Investors who have little or no near-term cash needs can have a longer investment Horizon and hold more volatile and less liquid assets to capture higher average returns at the low risk end of the spectrum is an investor saving to buy a house next year then a university endowment with immediate operational cash needs.

Followed by a pension fund and at the higher risk end of the spectrum are sovereign wealth funds who have a very long-term investment Horizon.

In addition to the risk Spectrum which incorporates risk tolerance investment Horizon and the need for the liquidity. There are other factors and characteristics which are also important to investors and will drive their investment strategy.

These can include tax considerations for example income being taxed at a different rate to capital gains.

Regulatory considerations some funds have restrictions on what type of assets they can purchase and some retail or restricted from investing in hedge funds political considerations and environmental social and corporate governance considerations collectively known as ESG.

Retail as a group is a huge segment with potentially big assets under management contribution. However, the lower invested Capital per individual among retail investors requires this service to the offered in a cost-efficient way institutional investors usually have complex needs and big portfolios. They require intense and typically in person servicing. They will also be big users of advisory Services High net worth investors sit between these two groups. These are individuals or family offices with significant assets the service and requirements of H&W sit somewhere in between those of retail and institutions. There is a huge spread within this group in terms of sophistication and preferences.

Institutional investors can be categorized into four main groups Pension funds insurance companies Sovereign wealth funds and endowments. Let's look at each one in more detail.

A Pension funds investment strategy is driven by the nature of their obligations to the underlying pension owners.

Pension funds estimate their obligations using the present value of future payments which stretch far into the future.

The calculation of these obligations are complex and involve assumptions about discount rates inflation and mortality.

However, the fund also needs some immediate liquidity needs to reflect payments to current retirees.

Matching the maturity of the asset portfolio with the maturity of the liabilities is known as asset and liability management.

Pension funds will mostly invest in assets with a long-term investment Horizon to capture higher returns in Meet the long-term obligations to the policyholders. However, they will also invest in some shorter term assets to meet payments to current retirees.

A key challenge for Pension funds is creating a portfolio of assets which match their obligations.

Most of their obligations are long-term and the immediate need for liquidity is limited often the Returns on the portfolio are exempt from tax. So they are indifferent between tax-free and taxable returns.

General insurance companies also known as non-life insurance companies provide short-tail insurance policies such as household car and health insurance. They ensure a fixed period of time typically up to one year. However, even one year policies have fairly long tails of payments. For example, a car accident can create medical treatment liabilities of many years. However, most of the liabilities are paid out within about a three-year period after the insured year insurance companies have many thousands of policies. So overall in normal circumstances, the claim payments are stable and predictable in return for taking on these liabilities. The insurance company is paid a premium up front the premiums are invested and steadily paid out partly to cover expenses, but mostly to insurance policy holders who have had accidents The maturity of a general insurance company's liabilities are shorter than the pension fund so they will have a more risk-averse portfolio strategy with a larger allocation to bonds than equities and some liquid assets to cover immediate claims their size and strategy has to support the needs of ongoing in future claims General insurance companies aim to build the portfolio of assets to match their liabilities to policyholders. They usually have a shorter investment Horizon than Pension funds typically holding less equities. They need more immediate liquidity to meet cash payments to policyholders.

Endowments come from assets provided by donors typically to support an institution very commonly endowment support academic institutions. The typical aim of an endowment is to generate stable returns to help fund the institutions operations in practice the endowments create a buffer for weaker years, but there is usually some form of continual cash support on a yearly basis. The largest university in dominant in the world is held by Harvard University worth around 40 billion US dollars.

Most endowments have a long-term investment Horizon. However, they can also have competing needs. For example Harvard's endowment States. It has to balance two competing goals the need to fund the operating budget with a stable and predictable distribution and the obligation to maintain the long-term value of endowment assets after accounting for inflation.

Typically endowments have a high allocation towards equities and alternative assets such as private Equity. They need some liquidity to fund the operational activities of the institution and lastly in many cases. The endowments returns are tax exempt.

A sovereign wealth fund is a state-owned investment fund that invests an assets such as stocks bonds real estate or investment Alternatives. The capital often comes from commodity export revenues such as oil and other natural resources Sovereign wealth funds can have different types of priorities one is a saving fund which is reserved for future generations with a very long time Horizon.

Stabilization funds are used to smooth out the volatility of government tax revenues providing funding in recessions. So they have a shorter investment Horizon than saving funds in summary saving funds will have a longer time Horizon than stabilization funds Sovereign wealth funds will normally be able to invest in a wide range of assets.

The need for liquidity differs depending on what the fund is used for saving funds will have little need for liquidity while stabilization funds will need liquidity during a downturn in the economic cycle. High net worth individuals are large enough to Warrant more intense customer service family offices serve ultra high net worth investors and offer a total outsourced solution to managing the financial and investment side of an affluent individual or family.

As we saw earlier hnw investors, sit between institutional and Retail investors in terms of needs and service requirements. There is a wide variance in their requirements depending on their circumstances and also in the amount of their wealth tax is an important distinction between retail and institutional investors who are less concerned about post tax cash flows.

Potential considerations include different tax rates on capital gains versus income jurisdictional differences inheritance tax and the timing of Investments around tax year dates.

Key to developing a strategy for a high net worth client is to establish their investment Horizon.

What cash needs they have in the future their personal tolerance for risk and tax considerations. They might have together. These inputs will drive the investment strategy which will be individually tailored to their circumstances private clients differ hugely in these inputs. The manager needs to ensure they understand the client's current situation their goals and that an investment policy is put together that is consistent with those goals and perhaps sometimes adjusts the goals.

The high net worth Market is split into various tiers as the amount of investable assets will often Drive the individual's requirements both from a tax and an investment Horizon point of view at the top are the ultra high wealth individuals and at the bottom are the mass Market the largest investable assets here is the mass affluent Market which is an increasing Focus for Asset Management firms, despite being the majority of all households at 71% The mass Market has the smallest total investable assets.