Institutional Investment — Theory and Practice

Abstract

One of the major changes in the UK capital market over the last quarter of a century and more has been the extent to which institutional investors have replaced individuals as the most important holders of ordinary shares. During the 1980s the Conservative government under Margaret Thatcher encouraged individual share ownership through the privatisation of nationalised industries. But although the number of adults owning ordinary shares increased from 3 million in 1979 to around 11 million in 1990, their relative importance in the stock market continued to decline. There was ‘widening’ rather than ‘deepening’ of share ownership — the number of personal shareholders rose, but their percentage of the total market continued to fall. In fact, a survey by London Stock Exchange in 1990 showed that 60% of personal shareholders held shares in only one company, and only 14% held shares in four or more companies. Between 1963 and 1992 the proportion of ordinary shares in UK listed companies held directly by individuals fell by two thirds — from almost 60% to under 20%. At the same time, the proportion held by the major institutional investors more than doubled — from 28% to 60% (see Table 7.1).