Institutional Investors Owning More of Larger Companies

by Gary Larkin for The Conference Board – The Governance Center Blog, November 23rd, 2010.

Institutional investors came back to the securities markets in droves in 2009 after fleeing during the financial crisis of 2007-2008, according to The 2010 Institutional Investment Report released by The Conference Board earlier this month. A tell-tale sign of the trend was the increased institutional ownership concentration in the 1,000 largest U.S. corporations.

As markets rallied in 2009, ownership concentration by institutional investors continued to expand in all but the 50 largest U.S. corporations, the 64-page report stated. Co-authored by Matteo Tonello, director of corporate governance research for The Conference Board, and Stephan Rabimov, an economist who has co-authored the report since 2004, the report showed that institutional investors owned 73 percent of the top 1,000 companies in 2009 compared to 69 percent in 2008. It is noteworthy that the bracket group consisting of the 50 largest companies in terms of market capitalization is the one for which institutional investors reported the only setback in 2009 (when average ownership concentration was reduced from 64.5 percent to 63.7 percent).

Overall, total institutional investment assets rose 14 percent to $25.35 trillion, a level that hadn’t been reached since the end of 2007, when it was $28.27 trillion. [See press release]

“These findings document an extraordinary upward movement from the 21.3 percent plunge of 2008, albeit still far from the best performances of an industry that between 1995 and 2007 had experienced unprecedented growth of 23.3 percent on an annualized basis,” Tonello said. “Of course, the historical significance of this data should also be put in context with the new economic uncertainties and the added market volatility of the last few months.” (continue reading… )

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