Archie Norman blames pension funds for the London stock market downturn

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City grandfather Archie Norman has criticized the lack of UK pension fund money invested in British companies and the decline in corporate share options as reasons for the long-term market malaise. London stock market.

Norman, chairman of M&S and a board member of private equity firm Bridgepoint, told the Financial Times that it was “undeniable” that the sharp decline in pensions in the UK was overinvesting in shares “has significantly reduced the depth” of funds available for support. domestic securities.

“Most large corporate pension funds are invested with low risk and low returns,” he said. “If they have invested in an index tracker or . . . private wealth, we would have eliminated much of the pension deficit and made a pool of capital available to invest in British institutions.”

He added: “I am a board member of a private equity firm that is making significant investments in European companies, but our money comes from large companies. [international] pension funds and public sector endowments.

“They are invested for long-term returns, creating abundant capital, thriving stock markets and the growth of private companies – but this is not happening in the UK.”

He also pointed to the decline of corporate stock options. “If you go back 30 years, everyone used to have stock options — the typical way executives were compensated was you got salary, bonus and stock options.”

His opinion is considered London Stock Exchange has faced a shortage of corporate listings in recent years, as companies choose New York in search of higher valuations and deeper capital markets.

However, signs of a resurgence in initial public offerings have emerged in recent weeks as a number of companies including computer makers Raspberry Pi plans to list on LSE.

The underfunding of pensions stems from an accounting change in 2000 that resulted in defined benefit plans drawing on stocks and bonds to match their obligations – payments to employees.

As a result, pension funds and insurance companies have reduced their equity holdings from half their portfolios to 4% over the past two decades, according to consulting firm Ondra.

Norman, a former Conservative MP, added that automatically enrolling employees into company pensions was a missed opportunity for savings to be channeled into domestic stocks.

“We now have auto-enrolment, so everyone has a pension, but most don’t know what it’s invested in. We did this when we had the opportunity to tell people that your savings are invested in British industry.”

Norman added that at Asda, where he was previously chief executive and chairman, around 70,000 colleagues including checkout operators and store cleaners had the option to share and become shareholders.

“Now we have taxed stock options and made the accounting treatment unacceptable for companies. [making them less popular]. Wouldn’t it be a good idea if, in a large British company, more employees owned shares?”