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Institutional equity investing in Britain from 1900 to 2000

Published online by Cambridge University Press:  30 January 2019

Nigel Morecroft  and
Craig Turnbull
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Abstract

In Britain around 1900, established financial institutions for long-term savings such as life assurers, and pension funds which were just in their formative phase, did not make material allocations to publicly quoted equity markets or ordinary shares; long-established life assurers, for example, had less than 3 per cent allocated to the asset class (Baker and Collins 2003). Over the following 100 years, this picture radically changed, with equities emerging as the central asset class for many institutional investors and the term ‘the cult of (the) equity’ was coined (Scott 2002; Avrahampour 2015). As the century progressed, institutional investors superseded private individuals and became the dominant holders of British publicly quoted companies (Cheffins 2010). Despite the attractions of the asset class and their generally high returns, within a relatively short period by the end of the century, institutional equity exposure had peaked and was in decline both at life assurers and within pension funds. Here we highlight, and link together, the key actuarial (Turnbull 2017) and investing (Morecroft 2017) ideas that were influential in these developments. We also identify the main individuals who were instrumental in the application of equity investing to institutional portfolios. The article has an emphasis towards years from 1920 to 1960 when most of the changes to investment practice and actuarial theory occurred.

Keywords

equitiesactuaryinvestmentKeyneslife officeDefined Benefit pension fund

JEL classification

B2: History of Economic Thought since 1925 N2: Financial Markets and Institutions G1: General Financial Markets G2: Financial Institutions and Services
Type
The past mirror: notes, surveys, debates
Information
Financial History Review , Volume 26 , Issue 1 , April 2019 , pp. 1 - 19
Copyright
Copyright © European Association for Banking and Financial History e.V. 2019 

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Footnotes

The authors wish to thank the editor and two anonymous referees for useful comments. The usual disclaimer applies.

References

Sources

The Lloyds Bank Archive in Edinburgh has comprehensive records of Scottish Widows’ historic annual reports to policyholders.

The London Metropolitan Archive holds papers on both the National Mutual Life Assurance Society and also the private papers belonging to George Ross Goobey.

The History of Pensions. www.pensionsarchive.org.uk/82 (accessed 16 June 2016).

Standard Life: data provided directly from the Capital and Risk Management department within Standard Life, 3 July 2018.

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