Americans gain the Footsie whip hand

AMERICANS have grabbed a huge chunk of Britain's top 100 public companies in a dramatic shift in ownership since New Labour came to power eight years ago, a new study reveals.

The massive swing follows a change in identity of the big institutional investors - the pension funds, life insurers and mutual funds - which control the bulk of the shares in companies listed on the London Stock Exchange.

At the end of 2004, four US-controlled funds, led by Fidelity, had between them 58 separate shareholdings in FTSE 100 companies worth more than 5% of the market value of each of the London-listed companies. Britain's top seven institutional investors could muster only 14 holdings of equivalent size in the same 100 companies.

American funds have adopted an increasingly international investment strategy approach. At the end of 1998, barely a year after Tony Blair moved into Downing Street, the opposite was the case.

Mercury Asset Management was the most influential UK fund with 45 substantial holdings. But even that fund had recently fallen into US ownership and been renamed Merrill Lynch Investment Managers.

The study, by an international investment bank and sourced from data provided by market analysts at Citywatch, identifies insurer-to-asset manager Old Mutual as the top UK institution, with four large holdings at the end of 2004. The next six so-called UK funds each have only two similar-sized holdings each. This compares with 19 for Fidelity, 16 for Capital and 11 for Franklin Templeton, all of whose ultimate corporate control rests in US hands.

The influence of these funds has come to light in recent UK bid battles and board shake-ups. Philip Green's aborted takeover approach for Marks & Spencer involved Green and the retailer's board frantically courting Californian fund manager Brandes, the company's largest shareholder. Fidelity was one of the ringleaders behind the blocking of Carlton chairman Michael Green as chairman of the newly-merged ITV.

Peter Montagnon, head of investment affairs at the Association of British Insurers, whose members own one in six of all FTSE company shares, said British companies should not 'underestimate the chunky collective holdings of the [UK] long-term institutions which are still there'.

He said his members were also taking a 'more engaged approach', adding: 'It is not aggressive. It is in the interest of companies to cultivate a high quality relationship with their long-term investors.'

Montagnon said the ABI was also spending more time talking on behalf of its UK members with some of the larger US funds about British companies' corporate governance.