Institutional investments down for the first time in fifty years

23/09/2002 10:00

Since the published figures on institutional investors were incorrect, this article is incorrect.

The value of total investments by pension funds, insurance companies and investment funds fell by ten billion euro in 2001, a decrease of about one percent. This is the first time the value has decreased since 1950.

The decline follows a period of sturdy growth in 1998 and 1999 (thirteen and sixteen percent) and a more modest increase of five percent in 2000.

Investments by institutional investors and GDP

Shares: falling prices, large acquisitions

The modest growth in 2000 and the decrease in 2001 can largely be explained by falling share prices. Lower prices accounted for a loss of nine billion euro in the value of investments in 2000; in 2001 they resulted in a decrease of 51 billion euro

In spite of the sharp decline on the stock market, the proportion of shares in the portfolios of institutional investors remains quite steady, at 43 percent. The effect of the lower prices is compensated by substantial purchases of shares. On balance institutional investors bought 44 billion euro worth of shares in 2001.

Private loans fall further

Institutional investors invest less and less in private loans. The share of these investments in the total portfolio fell to eight percent. Ten years ago they accounted for 45 percent, twenty years ago this was still as high as 59 percent. Loans to the government in particular have all but disappeared from investment portfolios. As a component of investment they have shrunk from twelve percent ten years ago to less than half a percent today.

More investments abroad

The increasing trend of investment abroad continued in 2001 with a noticeable role reserved for bonds. Total foreign investment by institutional investors accounted for 54 percent of the total investment portfolio in 2001, 4 percent points more than in 2000.

The increase in foreign shares in the overall share portfolio in the last two years was more modest.