The UK Market -Shares owned by..?

[monabri]

https://www.ons.gov.uk/economy/investme ... hares/2022

Main Points

1. At the end of 2022, shares in quoted UK-domiciled companies listed on the London Stock Exchange (LSE) were worth a total of £2.42 trillion.

2. The proportion of UK shares held by overseas investors (rest of the world) increased again to a record high of 57.7% of the value of the UK stock market.

3. The proportion of UK shares held by UK-resident individuals fell to 10.8%, down by 1.2 percentage points from 2020.


Nearly 60% of the UK market owned by overseas investors.

[simoan]

https://www.ons.gov.uk/economy/investmentspensionsandtrusts/bulletins/ownershipofukquotedshares/2022

Main Points

1. At the end of 2022, shares in quoted UK-domiciled companies listed on the London Stock Exchange (LSE) were worth a total of £2.42 trillion.

2. The proportion of UK shares held by overseas investors (rest of the world) increased again to a record high of 57.7% of the value of the UK stock market.

3. The proportion of UK shares held by UK-resident individuals fell to 10.8%, down by 1.2 percentage points from 2020.


Nearly 60% of the UK market owned by overseas investors.

This is almost wholly down to the dumping of UK equities by UK pension funds and the low ranking of the UK in Global ETFs which have gained popularity. I think I read somewhere the UK market has gone from something like 40% to 5% of UK pension fund holdings in the past 20 years. I'm not saying this momentum is going to reverse any time soon, but it has been done in the usual dumb way that only institutions can excel at i.e. without reference to individual company valuations, which has left some very good opportunities for overseas investors and those UK investors prepared to rummage around in the bargain bin.

[monabri]

https://www.ons.gov.uk/economy/investmentspensionsandtrusts/bulletins/ownershipofukquotedshares/2022

Main Points

1. At the end of 2022, shares in quoted UK-domiciled companies listed on the London Stock Exchange (LSE) were worth a total of £2.42 trillion.

2. The proportion of UK shares held by overseas investors (rest of the world) increased again to a record high of 57.7% of the value of the UK stock market.

3. The proportion of UK shares held by UK-resident individuals fell to 10.8%, down by 1.2 percentage points from 2020.


Nearly 60% of the UK market owned by overseas investors.

This is almost wholly down to the dumping of UK equities by UK pension funds and the low ranking of the UK in Global ETFs which have gained popularity. I think I read somewhere the UK market has gone from something like 40% to 5% of UK pension fund holdings in the past 20 years. I'm not saying this momentum is going to reverse any time soon, but it has been done in the usual dumb way that only institutions can excel at i.e. without reference to individual company valuations, which has left some very good opportunities for overseas investors and those UK investors prepared to rummage around in the bargain bin.

ONS data https://www.ons.gov.uk/economy/investme ... ofukshares

(2022 data, table 2)

Source - ONS link above




Here's a link to Pensions Age which makes reference to the Office for National Statistics data.

The proportion of UK quoted shares that are owned by pension funds fell to a record low of 1.6 per cent in 2022, the Office for National Statistics (ONS) has revealed.

https://www.pensionsage.com/pa/Proporti ... rd-low.php

It increases to 4.2% if Insurance companies ownership is added in.

[simoan]

Here's a link to Pensions Age which makes reference to the Office for National Statistics data.

The proportion of UK quoted shares that are owned by pension funds fell to a record low of 1.6 per cent in 2022, the Office for National Statistics (ONS) has revealed.

https://www.pensionsage.com/pa/Proporti ... rd-low.php

It increases to 4.2% if Insurance companies ownership is added in.

Yes, the 4.2% combined figure rings a bell from a Bloomberg article I read earlier this year. Can't find it now, but the main takeaway is the large reduction over the past 20 years. It has left some high quality companies on cheaper valuations than their overseas peers. If you think that differential will close at some point, then there is money to be made through simple mean reversion. However, it could just be that the overseas competitors are too expensive and it is they that will revert to the mean

[tjh290633]

Here's a link to Pensions Age which makes reference to the Office for National Statistics data.

The proportion of UK quoted shares that are owned by pension funds fell to a record low of 1.6 per cent in 2022, the Office for National Statistics (ONS) has revealed.

https://www.pensionsage.com/pa/Proporti ... rd-low.php

It increases to 4.2% if Insurance companies ownership is added in.

Yes, the 4.2% combined figure rings a bell from a Bloomberg article I read earlier this year. Can't find it now, but the main takeaway is the large reduction over the past 20 years. It has left some high quality companies on cheaper valuations than their overseas peers. If you think that differential will close at some point, then there is money to be made through simple mean reversion. However, it could just be that the overseas competitors are too expensive and it is they that will revert to the mean

That's surely because they were obliged to invest in fixed interest stocks by the regulations.

TJH

[stockton]

The whole situation makes for very poor corporate governance, and it is well past the time that some effort was put into considering how companies are controlled.

[Dod101]

The whole situation makes for very poor corporate governance, and it is well past the time that some effort was put into considering how companies are controlled.

You have raised an interesting point but what exactly are you getting at? There have been relatively few scandal in recent years.

Dod

[XFool]

Travel giant considers leaving London Stock Exchange

https://www.bbc.co.uk/news/business-67634704

Tui, one of world's largest travel firms, has said it is considering quitting the London Stock Exchange in favour of a listing in Frankfurt.

"The holiday giant said some shareholders had asked whether its UK listing was "optimal and advantageous".

The move would deal another blow to London's attractiveness as a base for big firms, with several opting to list on exchanges overseas in recent years.

TUI said it was considering putting the plan to a shareholder vote next year."

[Dod101]

https://www.ons.gov.uk/economy/investmentspensionsandtrusts/bulletins/ownershipofukquotedshares/2022

Main Points

1. At the end of 2022, shares in quoted UK-domiciled companies listed on the London Stock Exchange (LSE) were worth a total of £2.42 trillion.

2. The proportion of UK shares held by overseas investors (rest of the world) increased again to a record high of 57.7% of the value of the UK stock market.

3. The proportion of UK shares held by UK-resident individuals fell to 10.8%, down by 1.2 percentage points from 2020.


Nearly 60% of the UK market owned by overseas investors.

This is almost wholly down to the dumping of UK equities by UK pension funds and the low ranking of the UK in Global ETFs which have gained popularity. I think I read somewhere the UK market has gone from something like 40% to 5% of UK pension fund holdings in the past 20 years. I'm not saying this momentum is going to reverse any time soon, but it has been done in the usual dumb way that only institutions can excel at i.e. without reference to individual company valuations, which has left some very good opportunities for overseas investors and those UK investors prepared to rummage around in the bargain bin.

As I have commented before, a lot of the ‘dumping’ of UK shares by pension funds is not on grounds of valuation but simply the closing of the DB schemes. They were suited to the long term nature and outlook of ongoing DB schemes where there was a solid chore of assets which usually formed an indefinite part of the DB scheme assets but equities are not suited to DB schemes which are closed and in run off. DC schemes are still relatively new as pension schemes go. Maybe in due course as the assets in DC schemes build up we will see a return of the equity but I guess that may take some time.

Dod

[Charlottesquare]

This is almost wholly down to the dumping of UK equities by UK pension funds and the low ranking of the UK in Global ETFs which have gained popularity. I think I read somewhere the UK market has gone from something like 40% to 5% of UK pension fund holdings in the past 20 years. I'm not saying this momentum is going to reverse any time soon, but it has been done in the usual dumb way that only institutions can excel at i.e. without reference to individual company valuations, which has left some very good opportunities for overseas investors and those UK investors prepared to rummage around in the bargain bin.

As I have commented before, a lot of the ‘dumping’ of UK shares by pension funds is not on grounds of valuation but simply the closing of the DB schemes. They were suited to the long term nature and outlook of ongoing DB schemes where there was a solid chore of assets which usually formed an indefinite part of the DB scheme assets but equities are not suited to DB schemes which are closed and in run off. DC schemes are still relatively new as pension schemes go. Maybe in due course as the assets in DC schemes build up we will see a return of the equity but I guess that may take some time.

Dod

Makes sense, whilst the AE DC schemes must have amassed pretty big holdings by now, whilst individual AE funds tend to be small ,the fact that nearly all employees need offered an AE scheme must mean there are now a lot of them. My own with People's has apparently 6m members, NEST etc likely even more as they were "free" (Not really, their fee charging structure negated the free lunch)

However investment choices likely mean a lot of funds are not within the UK, my own for instance are in an up to 85% share profile fund but the investments are worldwide not just UK. and their top ten holdings are things like Apple, Nvidia, Microsoft.

To get an idea how small these are, mine has followed the profile re percentage contribution of earnings since AE inception (Now 8% of band earnings), I get the max (Circa £290 gross a month) and I think this pension pot is now still only circa £24k, not exactly large. (I plan when I retire to switch it into my SIPP)

https://thepeoplespension.co.uk/investm ... factsheet/

[XFool]

Britain is stuck in a doom loop: the system is rigged against growth. That needs to change

https://www.theguardian.com/commentisfree/2023/dec/31/britain-stuck-in-doom-loop-system-rigged-against-growth-that-needs-to-change

UK’s pension regime makes investment nigh-on impossible. A radical reform under Labour would turbo-charge the economy

[tjh290633]

Britain is stuck in a doom loop: the system is rigged against growth. That needs to change

https://www.theguardian.com/commentisfree/2023/dec/31/britain-stuck-in-doom-loop-system-rigged-against-growth-that-needs-to-change

UK’s pension regime makes investment nigh-on impossible. A radical reform under Labour would turbo-charge the economy

Wasn't it reform by Labour that led to the current pensions regime, and the decline of defined benefit schemes?

TJH

[XFool]

Wasn't it reform by Labour that led to the current pensions regime, and the decline of defined benefit schemes?

"Gordon Brown stole my pension!" is a familiar cry from 'the usual suspects'.

In truth it is (inconveniently) much more complicated than that. The reasons span many years and involve many actors (including Robert Maxwell, Nigel Lawson...) and have, in the past, been more fully discussed on the old Motley Fool. I have looked briefly online but have presently not found an obvious link that jumps out at me describing the history and reasons in full, though they were available in the past.

[Spet0789]

Britain is stuck in a doom loop: the system is rigged against growth. That needs to change

https://www.theguardian.com/commentisfree/2023/dec/31/britain-stuck-in-doom-loop-system-rigged-against-growth-that-needs-to-change

UK’s pension regime makes investment nigh-on impossible. A radical reform under Labour would turbo-charge the economy

Will Hutton does talk nonsense sometimes.

I stopped reading his article when in the space of two sentences he said British companies were undervalued and yet buying back their stock at inflated prices.

[SalvorHardin]

Wasn't it reform by Labour that led to the current pensions regime, and the decline of defined benefit schemes?

The big damage was done by the Pensions Act 1995, passed by the Conservatives in response to several major pension scheme frauds (e.g. Maxwell). Things such as restricting self-investment, improving administration and making sure that companies paid into the scheme on time (holding back contributions to help with cashflow was popular).

Sounds good, but it also forced schemes to use market values, rather than discounted cashflow, which put a lot of companies off. The wild swings that this produced in scheme surpluses now hit the accounts, which greatly encouraged schemes to switch from shares into gilts to reduce volatility (and to close down schemes).

I started work as an Actuary not long after the Act came into force. Most of the senior Actuaries were of the opinion that it would lead to the closure of almost every private sector pension scheme within 20 to 25 years and that pension schemes would sell most of their shares and reinvest primarily into gilts.

Gordon Brown stopping schemes from reclaiming advanced corporation tax just sped this up a bit.

[scrumpyjack]

Will Hutton does talk nonsense sometimes.

Almost always, rather than sometimes!

[Alaric]

Nearly 60% of the UK market owned by overseas investors.

It's worth asking how the statistics are compilled. How is a Dublin based ETF classified, particularly hen it has a wider focus than a single country? You need a double look through. Firstly how much of the ETF has UK Brokers as custodians? Second, how much of the custodian assets represents holdings by UK individuals direct or through ISAs and SIPPs?

[Steveam]

I’m not a particular fan of Hutton or the arguments or solutions he proposes but the vehement rubbishing here is, as far as I can tell, reactive based on the market knows best, rather than analytical. First there is the “It was all Gondon Brown’s fault” (wrong as explained by SalvorHardin) but also irrelevant. Then just rubbish Hutton himself.

I’m not convinced by Hutton’s arguments but I’d be keen to hear alternatives. Like it or not we do seem to be selling the family silver cheaply (if one defines cheap in free market terms then it’s meaningless as every price is the right price). We seem to have something akin to the tragedy of the commons. Is there a sensible role for government here? I really don’t know.

Best wishes,

Steve

[Nimrod103]

I’m not a particular fan of Hutton or the arguments or solutions he proposes but the vehement rubbishing here is, as far as I can tell, reactive based on the market knows best, rather than analytical. First there is the “It was all Gondon Brown’s fault” (wrong as explained by SalvorHardin) but also irrelevant. Then just rubbish Hutton himself.

I’m not convinced by Hutton’s arguments but I’d be keen to hear alternatives. Like it or not we do seem to be selling the family silver cheaply (if one defines cheap in free market terms then it’s meaningless as every price is the right price). We seem to have something akin to the tragedy of the commons. Is there a sensible role for government here? I really don’t know.

Best wishes,

Steve

I think Hutton is rubbished here because he is seen as an apologist over many years for Labour's business (and banking regulation) policies, and Gordon Brown's actions in particular. I find it hard to take him seriously when, in that article, he called ISA's, "Investment Savings Accounts", which I don't believe to be correct. It is an elementary error, but evidence of a slapdash approach. In general, he always reminds me of a blind man stumbling around a room, finding things he can touch and understand, but completely missing the big picture.

His fundamental gripe is a reasonable one, frequently mentioned, that the UK stock market is under-performing its peers, is shrinking in size and Global importance, and that this is due fundamentally to risk averse investment on the part of fund managers and investors, who would rather put their money overseas. His solution is the usual Labour one of making mangers and investors put their money where the Government wants, usually into their favourite social engineering project of the day.

But the big picture he misses is that the numbers are saying that investment in the UK is not profitable enough (compared to the USA perhaps), because management is rubbish, taxes are too high, educational standards too low, the workforce not productive enough and infrastructure not good enough. But I don't see anything that Labour has to offer turning any of this around.

[Wuffle]

I am well aware of the audience here, but the automatic dismissal of govt social engineering projects in favour of your own, low tax social engineering project (me and my children) is fairly easily dimissed as just selfishness. It is subtler than standing near a brazier with a placard but...

W.