A:

Foreign Institutional Investors

A foreign institutional investor, or FII, is a hedge fund manager, pension fund manager, mutual fund, bank, insurance firm or representative agent of these entities who is registered to invest in a foreign country. The FII takes equity positions in foreign financial markets on behalf of the entity that is based in another country.

This term is frequently used in reference to investing in emerging market economies. Direct access to the equities markets in some countries is limited and regulated. For example, foreign institutional investors seeking to invest in Indian companies must register with the Securities and Exchange Board of India, or SEBI.

Foreign Institutional Investments

Emerging markets offer significant potential for growth in the near future. This potential is attracting large numbers of investors from the United States and other countries. Many investments are made in the form of foreign institutional investments. These investments are sometimes referred to as "hot money," since they often represent substantial sums that can be withdrawn from the markets at any time, potentially increasing volatility in foreign equity markets.

In the past few decades, developing economies began to appreciate the value of, and need for, foreign investments, and made moves to provide easier access to their financial markets. Registered foreign institutional investors increased 25% between 2006 and 2007. FIIs from the United States alone have devoted nearly $10 billion to investments in foreign equities.

Foreign institutional investments have favored the banking and construction sectors, as well as information technology companies. Major multinational companies involved in foreign institutional investment include Citigroup (C), HSBC (ADR -HSBC) and Merrill Lynch (MER).

RELATED FAQS
  1. What risks does a Foreign Institutional Investor (FII) face?

    Read about the types of risks that a foreign institutional investor faces when trading in Indian stock exchanges and dealing ... Read Answer >>
  2. What nations are actively recruiting FDI (foreign direct investments)?

    Understand the concept of foreign direct investments, and learn which countries most enthusiastically pursue investments ... Read Answer >>
Related Articles
  1. Investing

    What is a Foreign Institutional Investor?

    A foreign institutional investor (FII) is a person or a group of people operating or registered in a country that’s not their domicile.
  2. Investing

    Investing Beyond Your Borders

    Investing abroad poses risks, but can also help you diversify. Discover ways to invest in foreign stocks.
  3. Investing

    The Benefits of Foreign Investing in Today's Market

    Foreign markets are easier than ever to invest in and can provide diversification in your portfolio.
  4. Insights

    Ever Wanted to Own International Stocks? Here's How

    Tips and strategies for users to trade in different exchanges around the world.
  5. Taxes

    Get A Tax Credit For Your Foreign Investments

    The foreign tax credit provides a break on investment income made and taxed in a foreign country.
  6. Investing

    Protect Your Foreign Investments From Currency Risk

    Hedging against currency risk can add a level of safety to your offshore investments.
  7. Investing

    Go International With Foreign Index Funds

    As global trade continues to expand and the world's economies grow, spice up your portfolio with these exciting opportunities.
  8. Investing

    Broadening Your Portfolio's Borders

    Find out what type of international fund might suit your needs in gaining exposure to foreign markets.
  9. Investing

    Explaining Foreign Exchange Risk

    Foreign exchange risk is the chance that an investment’s value will decrease due to changes in currency exchange rates.
  10. Managing Wealth

    Here's How To Tap International Markets (PBR, VALE)

    Access to foreign markets has grown a lot in recent years, allowing US market players to trade these bourses in real-time.
RELATED TERMS
  1. Foreign Institutional Investor - FII

    An investor or investment fund that is from or registered in ...
  2. Foreign Direct Investment - FDI

    A foreign direct Investment (or FDI) is an investment made by ...
  3. Foreign Tax Credit

    A non-refundable tax credit for income taxes paid to a foreign ...
  4. Foreign Debt

    An outstanding loan that one country owes to another country ...
  5. Foreign Branch Bank

    A type of foreign bank that is obligated to follow the regulations ...
  6. Translation Risk

    The exchange rate risk associated with companies that deal in ...
Hot Definitions
  1. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an ...
  4. Salvage Value

    The estimated value that an asset will realize upon its sale at the end of its useful life. The value is used in accounting ...
  5. Cryptocurrency

    A digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of ...
  6. Promissory Note

    A financial instrument that contains a written promise by one party to pay another party a definite sum of money either on ...
Trading Center