Who owns the shares on the London Stock Exchange?

[EthicsGradient]

Reading a Will Hutton piece in The Observer this morning, he dropped in this factoid:

In 2000, around 42% of the shares on the London Stock Exchange were owned by insurance companies and pension funds; today, it is about 6%.

https://www.theguardian.com/commentisfr ... se-purpose

There's no source for that. It seems a huge drop. Perhaps there's qualifications to it (eg "by British insurance companies and pension funds") that he left out. I haven't been able to find where it comes from. But it has been a bit of a cliche that "the stock market is important to you even if you don't know it, because your pension is invested in it". Is that increasingly not true, for the British market anyway? And what is the ownership now? Is it dominated by OEICs and ETFs? How much is private investors (whether private pensions, ISAs or unsheltered ownership) holding company shares directly?

Do anyone know of good sources for this?

[Alaric]

And what is the ownership now? Is it dominated by OEICs and ETFs? How much is private investors (whether private pensions, ISAs or unsheltered ownership) holding company shares directly?

It would seem logical to suppose that a lot of share ownership is through ISAs and SIPPs neither of which would be classified as insurance companies or pension funds. Since 2000, both "with profit" funds and defined benefit funds have declined in importance. For both they have moved away from equities anyway as there's been a greater focus on the need to meet guaranteed liabilities.

I suspect reliable statistics may be difficult to obtain, given that even private investors don't hold shares directly, but in pooled form with the nominees of their Broker. For OEICs and ETFs it would be necessary to look through to their holders to establish how much represented wealth in the hand of provate investors.

[monabri]

Office for National Statistics

https://www.ons.gov.uk/economy/investme ... hares/2020

Table of contents
Main points
Beneficial owners
UK FTSE All-Share Index
Rest of the world
Individuals
Insurance companies
Unit trusts and other financial institutions
Public sector
Geographical breakdown
Ownership of UK quoted shares data
Glossary
Measuring the data
Strengths and limitations
Related links

[EthicsGradient]

I gave up trying to find the "42%" figure, and instead found this, which just shows a lot of it in graph form: https://www.ons.gov.uk/economy/investme ... hares/2020

It is about beneficial owners, so SIPPs and ISAs should appear under "Individuals", I think.

'Rest of the world' ownership increased from 36% in 2000 to 56% in 2020. In 2020, that's mostly "unit trusts" and "other financial institutions", mainly in North America, with about 10% overseas pension funds (so a bit over 5% in all - more than UK pension funds at 1.8%).

"Individuals" are listed as 16% in 2000, and 12% in 2020.

(Thanks monabri - I found that while you were replying)

Looking at their spreadsheet (section 10) with a few more figures, and ignoring the 1998-2008 period (when they made assumptions about how pooled investments were divided up which turned out to be increasingly inaccurate, pension funds have gone from 22.1% in 1997 to 1.8% in 2020, and insurance companies from 23.6% in 1997 to 2.5% in 2020.

[Dod101]

To answer the original poster, the 'cult of the equity' for pension schemes is well and truly over, probably because many/most pension schemes are closed to new members and even I think many are closed to further contributions from existing members. Basically they are no longer funds that are looking into the indefinite future with a remit to fund these obligations. If it is a closed fund, clever actuaries can calculate a fairly accurate estimate of the funding requirements to meet its obligations and equity assets do not real meet these requirements.

Incidentally, the 12% attributed to individuals is a figure that has been quoted a lot in recent years and would include funds held in ISAs and probably in SIPPs.

Thanks again to monabri for finding these interesting numbers.

Dod

[scrumpyjack]

I very much doubt the reliability of this analysis as most shares will be held in the name of a nominee company. Only entities holding over 3% of a particular share need to disclose their beneficial shareholding.

[Alaric]

It is about beneficial owners, so SIPPs and ISAs should appear under "Individuals", I think..

Does "Rest of the World" include Ireland, major home of ETFs?

Why do they use the obsolete category of "unit trusts". They do still exist, but most have converted to OEIC form.

Presumably where the ownership is hidden behind a nominee they either ask the nominee for categorisation or guess based on the nature of the nominee.

At one time it seemed to matter that the UK was running a balance of payments deficit. Presumably financing this leads indirectly to the sale of shares in British based companies to "the rest of the world".

[scrumpyjack]

It is about beneficial owners, so SIPPs and ISAs should appear under "Individuals", I think..

Does "Rest of the World" include Ireland, major home of ETFs?

Why do they use the obsolete category of "unit trusts". They do still exist, but most have converted to OEIC form.

Presumably where the ownership is hidden behind a nominee they either ask the nominee for categorisation or guess based on the nature of the nominee.

At one time it seemed to matter that the UK was running a balance of payments deficit. Presumably financing this leads indirectly to the sale of shares in British based companies to "the rest of the world".

Yes the balance of payments deficit always used to be a major national worry. I guess it will at some point come back to bite us.
I can't see how such a link between the payments deficit and UK nationals selling british company shares to foreigners would work?
The people who owe the debt to foreigners are not, I would think, owners of many British company shares. If anything the wealthy have tended to invest more in overseas companies, making the deficit worse.

Certainly there has been a lot of buying of British property by foreigners so that may be what is keeping us afloat?

[mc2fool]

To answer the original poster, the 'cult of the equity' for pension schemes is well and truly over, probably because many/most pension schemes are closed to new members and even I think many are closed to further contributions from existing members.

You're thinking of defined benefit pensions, and that's true for them, but there are a huge number of defined contribution pension schemes, the vast majority of which are not SIPPs managed by individuals but "workplace pensions" managed by workplace pension scheme providers (!).

[Dod101]

To answer the original poster, the 'cult of the equity' for pension schemes is well and truly over, probably because many/most pension schemes are closed to new members and even I think many are closed to further contributions from existing members.

You're thinking of defined benefit pensions, and that's true for them, but there are a huge number of defined contribution pension schemes, the vast majority of which are not SIPPs managed by individuals but "workplace pensions" managed by workplace pension scheme providers (!).

Good questions. Where they they be invested? Is there a sort of default?

Dod

[EthicsGradient]

It is about beneficial owners, so SIPPs and ISAs should appear under "Individuals", I think..

Does "Rest of the World" include Ireland, major home of ETFs?

Why do they use the obsolete category of "unit trusts". They do still exist, but most have converted to OEIC form.

Presumably where the ownership is hidden behind a nominee they either ask the nominee for categorisation or guess based on the nature of the nominee.

At one time it seemed to matter that the UK was running a balance of payments deficit. Presumably financing this leads indirectly to the sale of shares in British based companies to "the rest of the world".

Yes the balance of payments deficit always used to be a major national worry. I guess it will at some point come back to bite us.
I can't see how such a link between the payments deficit and UK nationals selling british company shares to foreigners would work?
The people who owe the debt to foreigners are not, I would think, owners of many British company shares. If anything the wealthy have tended to invest more in overseas companies, making the deficit worse.

Certainly there has been a lot of buying of British property by foreigners so that may be what is keeping us afloat?

I think the economic idea is that, with a consistent deficit in the balance of payments for goods and services, either the value of the pound goes down consistently against other currencies (and while that's happened at times, it hasn't been as consistent as the deficit would cause on its own), or we have found something else to sell to people abroad - yes, property, but also the ownership of companies. This is further complicated, however, by many of the biggest companies quoted on the LSE being significantly foreign in terms of where they do a lot of their business, and sometimes formed by merger with foreign companies (eg AstraZeneca).

[mc2fool]

To answer the original poster, the 'cult of the equity' for pension schemes is well and truly over, probably because many/most pension schemes are closed to new members and even I think many are closed to further contributions from existing members.

You're thinking of defined benefit pensions, and that's true for them, but there are a huge number of defined contribution pension schemes, the vast majority of which are not SIPPs managed by individuals but "workplace pensions" managed by workplace pension scheme providers (!).

Good questions. Where they they be invested? Is there a sort of default?

Dunno, but I'd imagine that most are like this lot, https://thepeoplespension.co.uk/investing-your-pension/, which have even the "cautious" profile up to 60% shares ... however, it's global shares (only 5.4% UK), and that may be a part of the reported change....

[SebsCat]

To answer the original poster, the 'cult of the equity' for pension schemes is well and truly over, probably because many/most pension schemes are closed to new members and even I think many are closed to further contributions from existing members.

You're thinking of defined benefit pensions, and that's true for them, but there are a huge number of defined contribution pension schemes, the vast majority of which are not SIPPs managed by individuals but "workplace pensions" managed by workplace pension scheme providers (!).

Good questions. Where they they be invested? Is there a sort of default?

Dod

I expect that large amounts are ultimately invested in equities, but by a sufficiently convoluted means that it's not going to appear in statistics. eg the default fund for MrsSC's company DC scheme (run by Scottish Widows) was an apparently fairly low cost one, except that it only invested in other funds. At least some of those only invested in yet more funds. Nice and lucrative for the managers but not exactly transparent!

[Dod101]

To answer the original poster, the 'cult of the equity' for pension schemes is well and truly over, probably because many/most pension schemes are closed to new members and even I think many are closed to further contributions from existing members.

You're thinking of defined benefit pensions, and that's true for them, but there are a huge number of defined contribution pension schemes, the vast majority of which are not SIPPs managed by individuals but "workplace pensions" managed by workplace pension scheme providers (!).

Good questions. Where they they be invested? Is there a sort of default?

Dod

I expect that large amounts are ultimately invested in equities, but by a sufficiently convoluted means that it's not going to appear in statistics. eg the default fund for MrsSC's company DC scheme (run by Scottish Widows) was an apparently fairly low cost one, except that it only invested in other funds. At least some of those only invested in yet more funds. Nice and lucrative for the managers but not exactly transparent!

I know nothing about this area because these DC schemes were started long after I had retired. I wonder what sort of numbers would be involved? I would imagine not a huge amount compared to the long established DB pension schemes but I do not know. Do the members such as your wife have any say in the investments or are they just pooled with a fund,anafer chosen by the employer or how does it work? Slightly off topic but maybe I can be indulged.

Dod

[mc2fool]

To answer the original poster, the 'cult of the equity' for pension schemes is well and truly over, probably because many/most pension schemes are closed to new members and even I think many are closed to further contributions from existing members.

You're thinking of defined benefit pensions, and that's true for them, but there are a huge number of defined contribution pension schemes, the vast majority of which are not SIPPs managed by individuals but "workplace pensions" managed by workplace pension scheme providers (!).

Good questions. Where they they be invested? Is there a sort of default?

Dod

I expect that large amounts are ultimately invested in equities, but by a sufficiently convoluted means that it's not going to appear in statistics. eg the default fund for MrsSC's company DC scheme (run by Scottish Widows) was an apparently fairly low cost one, except that it only invested in other funds. At least some of those only invested in yet more funds. Nice and lucrative for the managers but not exactly transparent!

I know nothing about this area because these DC schemes were started long after I had retired. I wonder what sort of numbers would be involved? I would imagine not a huge amount compared to the long established DB pension schemes but I do not know. Do the members such as your wife have any say in the investments or are they just pooled with a fund,anafer chosen by the employer or how does it work? Slightly off topic but maybe I can be indulged.

Dod

Dod, the answer is in the link I gave, which I gather is typical. The employee (normally) has the choice of (a) I've no idea I'll let the provider choose (b) choosing a "profile", e.g. balanced, cautious, adventurous, and the provider choosing a fund mix to match or (c) the employee choosing from a (usually) limited set of "house" funds. Other providers may offer fewer or more options.

[Dod101]

You're thinking of defined benefit pensions, and that's true for them, but there are a huge number of defined contribution pension schemes, the vast majority of which are not SIPPs managed by individuals but "workplace pensions" managed by workplace pension scheme providers (!).

Good questions. Where they they be invested? Is there a sort of default?

Dod

I expect that large amounts are ultimately invested in equities, but by a sufficiently convoluted means that it's not going to appear in statistics. eg the default fund for MrsSC's company DC scheme (run by Scottish Widows) was an apparently fairly low cost one, except that it only invested in other funds. At least some of those only invested in yet more funds. Nice and lucrative for the managers but not exactly transparent!

I know nothing about this area because these DC schemes were started long after I had retired. I wonder what sort of numbers would be involved? I would imagine not a huge amount compared to the long established DB pension schemes but I do not know. Do the members such as your wife have any say in the investments or are they just pooled with a fund,anafer chosen by the employer or how does it work? Slightly off topic but maybe I can be indulged.

Dod

Dod, the answer is in the link I gave, which I gather is typical. The employee (normally) has the choice of (a) I've no idea I'll let the provider choose (b) choosing a "profile", e.g. balanced, cautious, adventurous, and the provider choosing a fund mix to match or (c) the employee choosing from a (usually) limited set of "house" funds. Other providers may offer fewer or more options.

Thanks. I was being lazy. That would suggest that, as I said, these DC schemes probably do not amount to much in relation to who owns shares on the LSE. But an interesting exchange nevertheless.

Dod

[SebsCat]

I know nothing about this area because these DC schemes were started long after I had retired. I wonder what sort of numbers would be involved? I would imagine not a huge amount compared to the long established DB pension schemes but I do not know. Do the members such as your wife have any say in the investments or are they just pooled with a fund,anafer chosen by the employer or how does it work? Slightly off topic but maybe I can be indulged.

I know there were a lot of potential funds available, but they all seemed to be Scottish Widows funds which in turn invested in other funds. She was in a lifestyle strategy plan which would have progressively switched to bonds but I had persuaded her to set a desired pension age of 75 so it wouldn't do that unless things went really pear shaped (my strongly held view is that the biggest risk to investment goals is not volatility but simply failing to ever achieve them). As a result she remained fully invested in the default fund that was "recommended" at the time her firm switched to SW (thankfully they switched from Equitable Life about the time their problems first emerged). It was this one https://www.trustnet.com/factsheets/p/q ... n-series-2 and, based on her actual contributions the overall return wasn't awful - a touch over 10% pa on the net amount. Historically this would have been in a DB pension so I would suggest the amounts in equities would be similar.

[Dod101]

I know nothing about this area because these DC schemes were started long after I had retired. I wonder what sort of numbers would be involved? I would imagine not a huge amount compared to the long established DB pension schemes but I do not know. Do the members such as your wife have any say in the investments or are they just pooled with a fund,anafer chosen by the employer or how does it work? Slightly off topic but maybe I can be indulged.

I know there were a lot of potential funds available, but they all seemed to be Scottish Widows funds which in turn invested in other funds. She was in a lifestyle strategy plan which would have progressively switched to bonds but I had persuaded her to set a desired pension age of 75 so it wouldn't do that unless things went really pear shaped (my strongly held view is that the biggest risk to investment goals is not volatility but simply failing to ever achieve them). As a result she remained fully invested in the default fund that was "recommended" at the time her firm switched to SW (thankfully they switched from Equitable Life about the time their problems first emerged). It was this one https://www.trustnet.com/factsheets/p/q ... n-series-2 and, based on her actual contributions the overall return wasn't awful - a touch over 10% pa on the net amount. Historically this would have been in a DB pension so I would suggest the amounts in equities would be similar.

Thanks. Always learning.

Dod