Institutional Ownership Multiplies

Individual ownership of U.S. stocks has fallen to a record low. The decrease in ownership underscores the importance of institutional investors in domestic equity markets, according to the Financial Times.

At the end of 2006, retail investors owned 34 percent of all shares and 24 percent of stock in the top 1,000 companies; record lows. Compared to individual investors in 1950, who owned 94 percent of all stocks and 63 percent in 1980, the percentage rates in 2006 are exceptionally low, according to a report of by the Conference Board.

Pension funds, investment companies, insurance companies, banks and foundations, held 76 percent of the shares in the largest 1,000 companies, up from 61 percent in 2000, according to the report. The 66 percent share of all stocks held by institutions was up from 63 percent two years before.

Carolyn Brancato, a co-author of the report, said that the rise of institutional ownership meant shareholders are becoming more vocal, organized, and activist. Brancato also said that pension funds were moving further into more aggressive investments such as hedge funds, as they tried to lift returns to meet their liabilities, according to FT.