Pension funds' share of the U.K. equity market has fallen to a fresh record low, partly reflecting their expectations of more profitable returns on overseas shares.
That's the view of the Office for National Statistics, whose data showed pension funds held 1.6% of U.K.-listed stocks in 2022, down from 1.8% two years prior. The funds' slice of the market has steadily declined over the past three decades, from a peak of 32% in 1992, the statistics show.
Insurers' share of the market edged up slightly to 2.6%, the data showed, though it remains around half what it was in 2016 and not much more than a tenth of 1990s levels.
According to Cara Spinks, head of insurance consulting at actuarial consultancy OAC, the trend partly reflects regulation that encouraged pension and insurance funds to buy corporate and government bonds. Many pension investors have also been lured away by higher returns in the U.S. equity market, Spinks said.
Capital market reforms to attract new company listings and U.K. politicians' exhortations to institutional investors to buy more London-listed equities have had little effect, with would-be market champions such as chip designer Arm Holdings opting to list in the U.S.
The ONS report highlighted one bright spot for the UK market — overseas investors' holdings have continued to grow and stood at a record high 57.7% in 2022.
