Mercer
Search


Consulting. Outsourcing. Investments.
Universal Ownership: Exploring Challenges and Opportunities
New report explores growing impact of universal ownership


United States
Washington, DC, 10 November 2006

 

The concept of universal ownership, in which large institutions own securities in a broad cross-section of the economy, is the subject of a new report published by Mercer Investment Consulting in conjunction with the Center for the Study of Fiduciary Capitalism at Saint Mary’s College of California.


Universal Ownership: Exploring Challenges and Opportunities is an examination of the influence of large, well-diversified institutional investors, such as pension funds, that own securities in a broad cross section of the economy. Investment returns of the largest funds, especially over the long run, are more dependent upon general macroeconomic performance than on the performance of any one stock or portfolio.

 

The report examines case histories and explores how these funds are reshaping the way board directors and corporate executives manage companies, and indeed how these developments affect the globe’s millions of citizen investors who need to protect and grow their savings.


The report reflects the views of the 36 speakers and participants who attended an event on universal ownership that was co-hosted last spring by the Center for the Study of Fiduciary Capitalism and Mercer Investment Consulting.

 

The meeting convened senior investment practitioners from four countries to exchange experiences, views and ideas concerning universal ownership. The report summarizes the presentations and discussions, and outlines action steps for investors developing an approach to universal ownership in what has been called “a new era of capitalism.”


“Universal ownership is an approach increasingly adopted by institutional investors, but many institutions are still formalizing investment policies and discussing the specific actions appropriate for their own organization,” said Craig Metrick, US lead for responsible investment at Mercer Investment Consulting. “This report is intended to help close that knowledge gap.”


“Not only do institutional investors own a majority of the public equity of the world, but through that ownership their success as investors is dependent on the performance of the economy at large,” said Jim Hawley co-director of the Center for the Study of Fiduciary Capitalism.


“For example, short-term investors may see corporate investment in training or renewable energy as a competitive disadvantage because of initial costs incurred,” said Mr. Metrick. “Universal owners, on the other hand, are more likely to support these types of investments because they will see these investments as potentially benefiting the long-term health of the specific company, by reducing risk of subsequent litigation or reputation damage, as well strengthening the broader sector or economy over the longer-term.”


Universal ownership is exemplified by initiatives being undertaken by a growing number of institutional investors. The report and the investor conference it summarizes respond to growing investor interest in the development of policies and implementation strategies based on the “universal owner” hypothesis.


The report, Universal Ownership: Exploring Opportunities and Challenges, can be downloaded free of charge.

 


The Center for the Study of Fiduciary Capitalism is dedicated to producing both academic and action-oriented research that explores the implications of the rise of institutional investors as the dominant owners of equity and debt capital. The Center will provide a forum for bringing together practitioners, academics and other experts so that the boundaries and duties of fiduciary responsibility can be expanded to better enhance portfolio-wide, long-term performance. More information is available at www.fidcap.org.

 

 

Mercer Investment Consulting is a leading global provider of investment consulting services, and offers customized guidance at every stage of the investment decision, risk management, and investment monitoring process. It has been dedicated to meeting the needs of clients for more than 30 years, and works with the fiduciaries of pension funds, foundations, endowments and other investors in some 35 countries.


Mercer Investment Consulting’s Responsible Investment business helps investment fiduciaries integrate environmental, social and corporate governance (ESG) considerations into investment decision making and ownership practices.

 

 

Throughout most of the world, Mercer Investment Consulting is an autonomous unit within Mercer Human Resource Consulting LLC, a wholly-owned subsidiary of Marsh & McLennan Companies, Inc. (MMC). In the US, the investment consulting business is operated through Mercer Investment Consulting, Inc., a wholly-owned subsidiary of Mercer Human Resource Consulting, Inc., the US operating unit of Mercer Human Resource Consulting LLC.