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A financial institution is one which makes its profits by dealing with other people's money. Perhaps the best example is a commercial bank, but there are many other types - like insurance companies and various asset managers. Normally they have to comply with a special Act of Parliament - like the Banks Act or the Insurance Act. Mostly these financial institutions invest funds for ordinary people who are saving for their retirement. They gather small amounts of money from hundreds of thousands or even millions of individuals every month and then pool that into great lump sums which they place on the JSE and in other markets. In South Africa there are basically three types of institutional fund managers - pension funds, insurance companies and unit trusts. Together the institutions account for about 90% of all the trades done on the JSE. Private investors make up the other 10%.

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