The Investment Management Association (IMA) has challenged claims of ‘inappropriate short-termism’ among European investors by releasing figures that suggest the average stock holding period among traditional managers has barely changed in a decade.
The IMA was responding to the European Commission’s Green Paper on corporate governance, which claims European investors are increasingly pursuing short-term gain at the expense of shareholders’ long-term interests.
The paper states that stock market turnover is now 150%, which implies an average holding period of eight months. However, the IMA states that three-quarters of this turnover is due to hedge funds and high frequency traders, not traditional managers.
The IMA’s own calculations suggest that the average holding period for the financial year ending in 2010 was nearly four years – higher than at the start of the decade. Turnover was greater between 2008 and 2009 and during the dotcom crash from 2001 to 2003, but this is understandable given the turbulent state of the markets in these years.
The IMA’s figures are based on HM Revenue and Customs data for stamp duty receipts. The association took the 0.5% charge on share trades and divided it by total market capitalisation to give a measurement of share turnover.
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