difference between foreign institutional investment and foreign direct investment?

Answer 1

Here is a good link at Investopedia.com
http://www.investopedia.com/ask/answers/05/foreignstocks.asp

Generally, a institutional investment is with or by institutions, say a Mutual Fund or Retirement Fund. It could be institutions owning parts of each other's investments. I may run a Mutual Fund, but have no exposure to foreign investments, so I may invest part of my fund in a different fund that does have investments in a foreign country.

Foreign direct investment would require that I open an account with a firm or company in the foreign country I wish to invest in. In olden days, it required a trip to that country to get it done. Only then could I invest directly in that country.

Forex is a good example. Prior to the year 2000, if you wanted to buy Swiss Francs, you had to get on a plane and fly to Switzerland and deposit money there to open an account. Only then could you trade Francs. This would be a direct foreign investment. Prior to 2000, your only recourse was to invest in a US institution or fund that had Swiss currency exposure. That institution had already set up an account in Switzerland in order to trade foreign currency, and I would be able to invest indirectly in Switzerland's currency, through the institution or fund.

Check out the link. It is much more explanatory.

Answer 2

Foreign direct investment (FDI) is defined as a long-term investment by a foreign direct investor in an enterprise resident in an economy other than that in which the foreign direct investor is based. The FDI relationship, consists of a parent enterprise and a foreign affiliate which together form a transnational corporation (TNC). In order to qualify as FDI the investment must afford the parent enterprise control over its foreign affiliate. The UN defines control in this case as owning 10% or more of the ordinary shares or voting power of an incorporated firm or its equivalent for an unincorporated firm. Foreign Institutional Investor - FII An investor or investment fund that is from or registered in a country outside of the one in which it is currently investing. Institutional investors include hedge funds, insurance companies, pension funds and mutual funds. Notes: The term is used most commonly in India to refer to outside companies investing in the financial markets of India. International institutional investors must register with the Securities and Exchange Board of India to participate in the market. One of the major market regulations pertaining to FIIs involves placing limits on FII ownership in Indian companies.