UK pension funds have trimmed their holdings of domestic equities to the lowest level for 34 years. The value of their holdings (180.1 billion) was a mere 15.6 per cent of the total market capitalisation of the London Stock Exchange (1,154.6 billion) at the end of last year.
That is less than half the 32.4 per cent in 1992 and the smallest percentage since the 9 per cent held in 1969. Or so says the 2002 share ownership survey, published by the Office for National Statistics, using data supplied by company share registrars and the UK CSD, Euroclear-owned CREST.
Individual shareholders (165.5 billion) are now not so far behind pension funds, though they saw the value of their savings plunge by 28 per cent in 2002 – more than the market as a whole. If unit trusts – which are held mainly by individuals – are included (18.9 billion), the retail sector is larger than the pension fund sector in terms of ownership of UK equities.
But the other main class of institutional investor – insurance companies -own more of the London market (230.1 billion). In all, institutional shareholders accounted for 49.4 per cent of UK ordinary shares at 31 December 2002, with a combined value of 571.1 billion. The proportion of institutional funds invested in FTSE-100 companies varied between 69 per cent and 92 per cent, with between 8 per cent and 31 per cent being invested in smaller companies.
“Other financial institutions” have increased their holdings of UK shares slightly over the last 12 months to 10.5 per cent (up from 9.9 per cent at the end of 2001). Holdings of UK shares by banks increased to 2.1 per cent (24.2 billion), making this their highest share since the survey began in 1963 – though there must be some risk this includes assets held by custodian banks on behalf of institutional investors in omnibus accounts.
Interestingly, the largest single group of investors on the London Stock Exchange are “the rest of the world.” Foreigners owned 32.1 per cent of ordinary shares, representing assets worth 370.4 billion, of which 41 per cent were owned by investors based in Europe.
Between 1 January 2002 and 31 December 2002 the market value of the London stock market plunged by 400 billion to 1,154.6 billion, or 26 per cent.
The survey used data drawn from the registers of 199 companies, which between them account for four fifths of the market capitalisation of the London Stock Exchange.