The City: Inside The Great Expectation Machine: Myth and Reality In Institutional Investment And The Stock Market

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This text examines the way these institutions work, how fund managers invest and the implications of their investment behaviour. Institutional investors own 75 per cent of the shares quoted in the UK. In no other major economy - including the USA, where the institutional control is a much more modest 55 per cent - do the investment instituions exert such a grip on the corporate sector. It is not uncommon for large and medium-sized British companies to have 80 or 90 per cent institutional ownership. Share-prices are determined by the fund managers working in a small number of large institutions. The nostalgic idea that price setting in the stock market is the result of a multitude of individual decisions is, this text argues, a dangerous illusion. The book provides information about the investment institutions around which the stock market revolves, arguing that their perceptions and their actions determine the level of share-prices and much else besides, such as! the success or failure of a takeover bid. It asks: what motivates fund managers and how do they make their decisions?; How do companies communicate with their institutional shareholders, especially in regard to the task of managing expectations? What companies do fund managers like or dislike, and why? And to what extent do they rely on the investment analysts employed by the investment banks for information and advice?