Ownership of the UK Stock Mareket

[scrumpyjack]

It is amazing (to me anyway) that over the last 25 years the share of the UK stock market owned by pension funds and insurance companies has declined from 39 per cent to 4 per cent and investment in unlisted UK companies to just 1 per cent. (per the Investors Chronicle 13th June)

One wonders who has bought all the shares that pension funds have dumped?

I guess part of this is down to government regulations forcing pension funds to invest in supposedly 'low risk' assets like Gilts (which get hammered by inflation), so they have had to dump equities.

Not surprising the UK market is so lowly rated, but at least at only 4% there can't be much selling pressure left! I read the other day that the largest buying of shares was companies buying back their own shares!

[Jam2Day]

Even worse, the actual 'equity' held by individual investors has diminished over the last fifty years and been replaced by ETF/tracker funds which are really derivatives. All part of the grand scheme...

[Alaric]

One wonders who has bought all the shares that pension funds have dumped?

What's the definition of "pension funds"? If it excludes SIPPs etc, that's where at least some of the money has gome.

But it's correct that changes to regulations including accounting rules have driven defined benefit pension funds and with profit insurance funds away from equities. There are still plenty of equity based ITs, OEICs and ETFs to take up the slack along with individuals directly investing through nominees.

[scrumpyjack]

Even worse, the actual 'equity' held by individual investors has diminished over the last fifty years and been replaced by ETF/tracker funds which are really derivatives. All part of the grand scheme...

Most ETFs are not derivatives but actually hold the underlying shares (I hold both Ishares and Vanguard FTSE trackers), so I would regard myself in effect holding the underlying UK shares.

[Jam2Day]

Even worse, the actual 'equity' held by individual investors has diminished over the last fifty years and been replaced by ETF/tracker funds which are really derivatives. All part of the grand scheme...

Most ETFs are not derivatives but actually hold the underlying shares (I hold both Ishares and Vanguard FTSE trackers), so I would regard myself in effect holding the underlying UK shares.

In theory, yes, legally, one would expect so, in reality, I am not convinced. I think there are just too many temptations to increasingly cut corners and game the system.

[Dod101]

It is amazing (to me anyway) that over the last 25 years the share of the UK stock market owned by pension funds and insurance companies has declined from 39 per cent to 4 per cent and investment in unlisted UK companies to just 1 per cent. (per the Investors Chronicle 13th June)

One wonders who has bought all the shares that pension funds have dumped?

I guess part of this is down to government regulations forcing pension funds to invest in supposedly 'low risk' assets like Gilts (which get hammered by inflation), so they have had to dump equities.

Not surprising the UK market is so lowly rated, but at least at only 4% there can't be much selling pressure left! I read the other day that the largest buying of shares was companies buying back their own shares!

I think I wrote about this a while back. Pension funds have moved out of equities in a big way because of the demise of the DB Scheme. They used to be open ended long term funds with a steady income in the form of contributions and a more or less balancing outgo in the form of pension payments to members in benefit, so that the core was an indefinite long term fund well suited to equity investment since there was little risk of having to cash in at the wrong moment. We now have a situation where these pension funds are in long term decline owing to their being closed to new members. As such they have a more or less defined liability and are merely and quite logically matching these liabilities with long term gilts and other bonds. Equities are much less suited for these sorts of liabilities.Hence the selling of equities over a longish period. I do not know how the replacement defined contribution schemes are invested but probably not much in equities given that they cannot be all that big at the moment anyway and are thus probably more ‘conservatively’ invested.

Dod

[mc2fool]

One wonders who has bought all the shares that pension funds have dumped?

• At the end of 2020, shares in quoted UK-domiciled companies listed on the London Stock Exchange (LSE) were worth a total of £2.17 trillion.
• The proportion of UK shares held in the rest of the world increased again to set a record high, at 56.3% of the value of the UK stock market.
• The proportion of UK shares held by UK-resident individuals fell to 12%, down by 1.3 percentage points from 2018.
• The proportion of UK shares held by other financial institutions rose by 4.6 percentage points to 12.8%, the highest on record.
• Unit trusts' proportion fell to 7.4%, down 2.0 percentage points from 2018.
• Insurance companies' share of the market continued to fall and stood at 2.5%, down 1.4 percentage points from 2018.

And there's more detail in the report.

https://www.ons.gov.uk/economy/investmentspensionsandtrusts/bulletins/ownershipofukquotedshares/2020

[AsleepInYorkshire]

It's an old article from 2015 - but remains reasonably relevant I'd suggest.

Chart that tells a story — UK share ownership



AiY(D)

[scrumpyjack]

One wonders how they can get reliable figures. For example if I invest in an ETF FTSE tracker, that probably registers as 'Overseas', as the ETFs (eg Ishares or Vanguard) are all incorporated in Dublin!

[Dod101]

One wonders how they can get reliable figures. For example if I invest in an ETF FTSE tracker, that probably registers as 'Overseas', as the ETFs (eg Ishares or Vanguard) are all incorporated in Dublin!

I doubt very much that the figures should be treated as more than an approximation but I think different surveys have come to broadly the same figures so they are probably not that far out. I am for instance more interested in the broad landscape than any accurate figures and I should imagine that applies to most interested parties.

Dod