Private Individuals Own More of the Stock Market

The Office of National Statistics (ONS) have published their latest survey of share ownership in UK companies. Historically there has been a long term trend for individuals to own less as a proportion of the overall market. But the latest figures tell a different story. From historic lows of 10% in 2010 and 2012, the figures for 2014 show an increase to 12%.

The proportion owned by the “Rest of the World” (which might also include some individuals) remains the highest at 54%. UK resident individuals are now second after the Rest of the World, with unit trusts and “other financial institutions” third and fourth. Holdings of pension funds and insurance companies continued to decline and are now only 6% and 3% respectively. This is no doubt because they have moved out of investment in equities due to regulatory changes rather than a view of the market attractiveness of equities.

It is of course interesting to note that while individuals hold 12% of the shares, they undoubtedly have much less influence on matters such as directors’ pay and corporate governance issues in general than pension funds and insurance companies. Why is this? Simply because the latter have block votes and use them while individuals are more often in pooled nominee accounts and don’t vote. ShareSoc has of course been campaigning on this issue for some time and been trying to act as a representative body for private shareholders. It emphasises the need for there to be an organisation that represents the interests of the millions of individual shareholders.

Other interesting data reported by the ONS shows that 31% of shares in AIM companies are owned by individuals, but only 9.5% of FTSE-100 companies. Other quoted companies are an intermediate figure of 21%. This probably reflects to some extent the high share ownership by directors in smaller companies, but also the fact that many individuals invest in smaller companies while institutions often steer clear of them.

Note that the ONS analysis looks behind the ownership on the share register to identify the beneficial owners. This is necessary because now some 58% of the shares by value are now in multiple ownership pooled nominee accounts.

Comment: It is good to see that the statistics suggest that private individuals are finally realising it is better to hold shares directly rather than have some intermediary step in between. Perhaps investors have woken up to the fact that the costs of intermediation offset any benefits there might be and that you don’t need to be a genius to manage your own share portfolio. Indeed the chances are you can do as well as the professionals. ShareSoc does of course encourage direct share ownership so let us hope this trend continues. All we need now is to achieve a system where such shareholders are properly enfranchised and not stuffed into pooled nominee accounts by default.

Note: more information about what is known on UK shareholdings by individuals is given on this page of the ShareSoc web site: http://www.sharesoc.org/market_statistics.html

Roger Lawson

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