Effective engagement with all UK Shareholders in a post MiFID II world
In 1998 UK pension funds owned 21.7% of the average UK quoted company, and UK Insurance Companies owned a further 21.6%. By the end of 2014 these two percentages had shrunk to just 3.0% and 5.9% respectively.
Overseas investors now dominate UK share registers, owning nearly 54% of all UK quoted company shares. But overseas investors apart, the biggest single domestic shareholder category, at 11.9%, (up from 10.2% in 2010) is now “individuals”. This trend is set to continue, particularly for many sub £500m market cap companies. Companies need to be aware of the increasing relevance and importance of the “Private Investor”, and ensure that they engage effectively with them.
Meanwhile, in recent years, institutional brokers’ research coverage, in terms of number of companies covered, particularly in the sub £500m market cap. category, has been in decline. This trend will accelerate post MiFID II.
Declining Institutional Brokers research coverage is only part of the story, because most institutional brokers do not allow their research to be accessible by Private Investors for compliance reasons anyway.
An increasing number of companies, particularly small / midcap & AIM listed companies, have embraced the “paid for” research model, which, as a result, has enjoyed huge growth in the UK in recent years. This trend will also continue post MiFID II.
We would encourage UK quoted companies to recognise the critical importance of individual shareholders, by:
ensuring all categories of investors have access to decent quality, regulated research;
ensuring all shareholders have access to current “market expectations”;
and for companies to include an Open Offer, whenever possible, alongside firm Institutional Placings, to allow (and encourage) all shareholders to participate