Institutional Shares
What it is:
Institutional shares are simply shares that can be bought in bulk. Usually, they do not come with additional rights or privileges; they exist to encourage institutions to make large investments in the funds that offer them. Individuals aren't always shut out of buying institutional shares -- often, they just have to be able to afford the minimum investment.
How it works/Example:
Let's say that the XYZ Mutual Fund invests in a variety of defensive stocks. Average investors can buy shares of the fund but must pay a front-end load. Institutional investors (such as pension funds and insurance companies) can buy institutional shares of the XYZ Mutual Fund, which do not involve a sales load but require minimum investments of, say, $300,000.
Institutional shares often have a "Y" at the end of their fund symbols.
Why it matters:
Also called Y shares, institutional shares are mutual fund shares that are available for sale only to institutions.