Administration September 2, 2008

Institutional Players Load up on Stocks

September 2, 2008 (PLANSPONSOR.com) - A new Conference Board study of data from the largest 1,000 U.S. companies found institutional investors have substantially increased their equity holdings to an unprecedented average 76.4% of corporations by year-end 2007.

Reported by

Fred Schneyer

A Conference Board news release said the 76.4% figure is up dramatically from its 1987 level of an average 46.6% of total stock.

The latest available year-end 2006 data shows that total institutional investors — pension funds, investment companies, insurance companies, banks, and foundations — controlled $27.1 trillion in assets, up from $24.4 trillion in 2005. Their 2006 level represents a ten-fold increase from $2.7 trillion in 1980.

Further, the equity market value of total institutional equity holdings increased from $571.2 billion in 1980 (or 37.2% of total U.S. equity markets) to $12.9 trillion (or 66.3% of total U.S. equity markets) in 2006.

According to the Conference Board, pension funds continue to account for the largest block of institutional investor assets, with $10.4 trillion or 38.3% of total 2006 assets under management. Within the pension fund category, state and local pension funds have grown more rapidly than other types of pension funds. Moreover, these state and local pension funds have also been growing more rapidly in the amount of assets they allocate to equities from bonds and other types of investments, the Conference Board said.

Public pension funds have increased their share of equity markets from 2.9% in 1980 to 10% in 2006. By comparison, private trusteed pensions (generally corporate funds) represent a smaller share of equity markets in 2006 than they did in 1980 - declining from 15.1% in 1980 to 13.6% in 2006.

Historically, U.S. pension funds put very little of their assets into international equities. This amount grew, however, and the largest 25 internationally invested U.S. pension funds put 18% of their 1999 assets into international equities. By 2005, this amount had declined to 13.5 % of their assets, although the number rose to 15.3% for 2007, the report said.

As of September 2007, $1.8 trillion in assets was estimated to have been managed by about 10,000 hedge funds worldwide. This represents an increase of 23.6% in hedge fund assets and 5.8% growth in the number of funds since 2006. Of these, more than half are domiciled in the United States.

The report shows the largest 200 U.S. employee retirement plans with defined benefit assets in hedge funds. The amounts invested in hedge funds by these pension funds rose to $76.3 billion for the year ended September 30, 2007.