Only small caps see minority of shares held by institutions, shows research

Jan 18, 2022
Highest levels of retail investment found at small-cap companies

Only at small-cap companies are a minority of shares held by institutional investors, according to findings published in IR Magazine’s Global and Regional Investor Relations Practice Report 2021.

Globally, six in 10 shares in publicly listed companies are held by institutional investors – the same level of institutional shareholding as in 2020 and a figure that the report authors say is consistent with previous years, where global numbers ranged from 56 percent to 60 percent.

But at small-cap companies, which typically struggle to attract institutional money, less than half (47 percent) of shares are held by these shareholders. This compares with a high of 66 percent at large-cap companies.

Instead, almost a quarter of the small-cap shareholder base is held by individual, retail investors – far higher than the 10 percent or 11 percent average across mid, large and mega-caps.

The retail boom

The Covid-19 pandemic ‘retail boom’ that has seen millions of new retail investors enter the US markets over the past two years has so far translated into a 3 percentage-point increase in the retail shareholder base of North American firms, to an average 17 percent in 2021. This puts the region ahead of both Asia (16 percent) and Europe (11 percent).

An April 2021 survey from Charles Schwab finds that 15 percent of US stock market investors at the time had only begun investing in 2020. The firm points to new platforms that make it easier and cheaper for retail investors to get involved in the market as playing a part in fueling the boom.

Interestingly, IR Magazine’s research points to Asia as a big outlier when it comes to institutional money. High levels of family ownership push down institutional holdings in the region’s companies, with the average Asian shareholder base just 30 percent institutional. This compares with 69 percent in North America and 58 percent in Europe.

The full Global Investor Relations Practice Report is available to Advanced subscribers to IR Magazine, while a global overview of the report is available to Essentials subscribers.

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