UK - Pension Schemes are putting the British economy in jeopardy by continuing to cut their equity weightings, London Stock Exchange chairman Chris Gibson-Smith claimed.
He said the three-year bear market had made schemes, regulators and investors in general more risk averse. This, he said, had manifested itself in the form of short-term investment approaches being taken and a greater preference for cash and bonds with lower short-term volatility and returns.
He said one of the principal drivers of UK PLC was the London securities market which would be harmed by the fall of the UK’s equity culture. He explained that companies would be forced to turn to foreign exchanges to raise capital, resulting in lower liquidity levels and few listings.
According to Russell/Mellon CAPS UK equity weightings are at 41.5% – an all-time low – and the LSE chairman said the move away from the asset class would result in investors “simply locking in” their losses.
Gibson-Smith added: “The ramifications on the economy should not be ignored if we undermine our equities culture.
“UK PLC will become a less attractive place for companies to raise capital, resulting in fewer listings and less liquidity.
“It is going to make the savings gap harder to bridge and the result will be lower returns for the industry, the exchanges and the man in the street.”
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