North America, Europe and China increase investment in UK shares
Overseas investors have increased their holdings of the London market’s blue chip shares to two thirds of the total, according to new analysis.
The percentage of foreign ownership of the FTSE 100 has risen from 58% in 2013 and 64% in 2019 to 66% at the start of 2021, with UK investors owning the other 34%.
By far the largest holdings from abroad are from US investors, which own 28% of London’s blue chips, according to research of share registers by Orient Capital, of which more than half is held by US mutual funds.
Including Canada in the equation, North American mutual funds now own £1 in every £6 of UK shares, up from just £1 in £9 in 2013.
This makes North American funds the largest shareholders in the FTSE 100, bigger even than British unit trusts, which now own £1 in every £7, according to the research.
UK pension funds own just 2%, following a steep decline from 8% over the past eight years, while overseas pension funds have dropped their stake from 10% to 7%.
“This is partly due to international diversification as UK pension assets have swapped domestic for overseas holdings, partly because liquidity rules have pushed pension funds into more fixed income assets and partly because of the increasing interest pension funds have shown in alternative assets like infrastructure whose long time-horizons match pension fund liabilities,” said Alison Owers, Orient’s chief executive.
European investors have increased their LSE holdings the most in the two-year period, across both institutional and retail shareholders. Europeans now claim a 19% stake, up from 15% in 2019.
Investors from China, especially public corporations, have also taken more of a stake in British companies, with holdings more than doubled from 0.7% in 2019 to 1.7% in 2021.
Owers added: “The UK stock market, in common with leading stock markets around the world, is dominated by big multinationals whose operations span every continent and compete with global peers, wherever they happen to be listed,”
“There is therefore no logic for investors only to consider companies that happen to be listed at home,” she said.
In terms of sectors, foreign investors seemed to have taken the greatest interest in the FTSE-listed mining companies, followed by healthcare and consumer goods companies.