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What is an elephant slang?

Elephants is slang for large institutional investors that have the resources to move markets on their own.

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What Are Elephants?

Elephants is slang for large institutional investors that can move markets on their own. Elephants have the funds to make high-volume trades. Due to the large volumes of securities that elephants deal in, any investment decisions that they make could have a huge influence on the price of the underlying financial asset. Key Takeaways Elephants is slang for large institutional investors that have the resources to move markets on their own. Institutional investors perform the majority of trades on major exchanges and, as a result, greatly influence the valuations of assets. The most common institutional investors are endowment funds, commercial banks, mutual funds, hedge funds, pension funds, and insurance companies.

1:17 Elephants

Understanding Elephants

Wall Street has a thing for using animal names to describe certain conditions, occurrences, and types of investors in stock markets. Examples include bulls, bears, stags, pigs, dogs, wolves, dead cats, ostriches, and elephants. The term elephant is often used in reference to institutional investors, a nonbank person or organization that trades securities in large enough share quantities or dollar amounts on behalf of its members that it qualifies for preferential treatment and lower commissions. Professionally managed entities such as mutual funds, pension plans, banks, and insurance companies are the largest force behind supply and demand in securities markets, performing the majority of trades on major exchanges. This means they greatly influence stock prices. Retail investors buy and sell stocks in round lots of 100 shares or more, whereas institutional investors buy and sell in block trades of 10,000 shares or more. Think of a swimming pool: If an elephant steps into the pool (buys into a position), the water level (stock price) increases; if the elephant gets out of the pool (sells a position), the water level (stock price) decreases. In comparison to the elephant's influence on stock prices, the effect of an individual investor is more like that of a mouse.

Types of Elephants

There are generally six types of institutional investors: endowment funds, commercial banks, mutual funds, hedge funds, pension funds, and insurance companies. The largest institutional investor, as of the end of 2020, was BlackRock, with nearly $7.3 trillion in assets under management (AUM). On Wall Street, the word elephant can also have other meanings. Two other famous investing terms that bear the name of the largest land animal on earth are white elephant, otherwise known as an investment whose cost of upkeep is not in line with how useful or valuable the item is, and hunting elephants—a buzz term used to describe the practice of targeting large companies as potential clients or acquisition targets. Sometimes investors also use the term elephant to refer to big conglomerates that are slow to adapt to change.

Special Considerations

Institutional investors have the resources and specialized knowledge to extensively research a variety of investment options. For this reason, regular retail investors often examine institutional investors’ regulatory filings with the Securities and Exchange Commission (SEC) to determine which securities they are buying. In theory, anticipating where the elephants of the investment world are going to invest next should net retail investors a fortune. Following their moves is less fruitful, as big trades from these giants tend to push share prices up considerably. Contrarian investors specialize in doing the opposite of the elephants—that is, buying when institutions are selling, and selling when institutions are buying.

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