The Office for National Statistics has just published its bi-annual report ‘Ownership of quoted shares for UK domiciled companies’ using 2014 data. For the first time, data for AIM companies has been split out from the whole market. It shows that retail investors form the largest cohort of investors in AIM, constituting 30.9%. We would argue that they are even more important because they provide the daily liquidity from which the share price is set; retail investors are not just the ‘marginal buyers’. Unless a company has a means of addressing this audience retail investors will either not be interested in the company, or worse, might be influenced by misleading analysis and information on media such as bulletin boards and blogs.
Chart 1 shows the data from a survey conducted by the ONS every two years. It covers the whole quoted market for companies whose shares are UK domiciled. The story most financial service professionals would expect to hear is that the role of the individual investor in the market has declined dramatically in the last 50 years and Chart 1 seems to bear this out. Back in 1963 these investors owned 54% of all shares. From the early 1960s pension funds discovered the benefits of equities with their tendency to protect against inflation. They had a very different membership profile to today, when most private defined benefit schemes are now closed to new members and the average member is ageing fast, and hence there was more appetite for risk in the 1960s. Insurance companies and collectivised ways for individuals to hold shares, such as unit trusts, have also become more important.
Even here the perceived wisdom about the ‘plucky’ retail investor misses the point. Between 2012 and 2014 retail investors’ ownership increased from 10.1% to 11.9% - that is 18% growth!