UK – State Street Global Advisors says it estimates that hedge funds own around 3.8% of the UK equity market.
“We estimate the hedge fund universe at $1trn, of which 50% will be involved in equity strategies of various types,” said SSGA’s European chief investment officer Rick Lacaille in a note.
“Of this, the UK represents about 10% of the investable universe and the average leverage in this sector we estimate at 1.5. This would result in hedge fund investments in the U.K. equity market to be roughly 3.8% of the market, although there is the potential for this to rise rapidly if opportunities for value added in the U.K. were significant.”
He added: “As mergers get underway, the share register tends to shift in favour of the specialist hedge funds who have a deeper understanding than the rest of the sector in the legal risks and probability and payoff of the different outcomes.”
Lacaille said the shift to foreign investors owning UK companies means “the decline of the concentrated ownership and control of a small number of domestic asset managers and insurers, and with it a more challenging picture for company management”.
He estimates that global pension funds increased their exposure to international equities from 32.3% to 38.4% between 1998 and 2004.
“The sharpest movements have been in the U.K., which has seen the domestic component of the equity portfolio fall from over 71% to less than 60% between 1998 and 2004.”