Research describes falling number of direct equity investors as “dangerous”

Researchers studying Euroclear data have described the falling number of individuals who own direct equity in Sweden as leading to a “dangerous” situation for investors, because of the behaviour being encouraged among institutional investors, who now account for 90% of the market.

In an interview with Sveriges Radio, Marina Burenstam, chief executive of financial adviser Burenstam and Partners, and Sophie Nachemson-Ekwall, PhD researcher at the Stockholm School of Economics, have described the current situation as the result of past politics.

Investing via funds has been heavily encouraged in the Swedish market, which helps explain why such a high proportion of the market is now owned by institutional investors, such as fund managers. Individuals have further been encouraged not to invest directly in equities by tax policy, which has made it easier to gain returns by investing collectively.

The danger arises because as a greater proportion of the market is institutionally owned, so it becomes subject to risks such as different fund companies following similar indices, and thereby creating asset price bubbles. When these collapse it poses a greater danger for society than if individual companies collapse, Nachemson-Ekwall said.

It is estimated that in 1970 about half of Swedish listed equity was owned by individuals. That fell to about a third by 1985, and about 15% by 2005.

To hear the radio interview in full click here (in Swedish): http://sverigesradio.se/sida/artikel.aspx?programid=83&artikel=5318082

 

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