Top pension funds tell FTSE to go further over free float rules

PensionersMajor UK pension fund investors have called on FTSE, the index provider, to increase the amount of shares in FTSE companies that are publicly available to 50% - which is beyond the 25% proposed by the index firm.

FTSE said last week that it would increase the ‘free float’ threshold for companies incorporated in the UK to 25% following a consultation with users of its FTSE UK Index Series.

Ben Levenstein, head of UK equities at the Universities Superannuation Scheme (USS), Britain’s second biggest pension fund, said: “In the coming months, USS would encourage FTSE to ensure free float requirements of primary listed companies rise to a level that will allow minority shareholders to exercise their stewardship responsibilities more effectively. This is essential for both FTSE and London to maintain their reputations as the preferred global destination for raising capital.”

USS believe that company entry into a flagship FTSE index should be a privilege because it provides access to a huge pool of equity capital.

Levenstein, added: “Investor capital must not be taken for granted.  In return for offering our capital, we must know our interests are protected. A higher free float will help provide that protection. Unless these concerns are addressed, risks to investors will rise and capital will naturally become more expensive.”

The move to increase the free float is designed to protect minority shareholders.

Other funds aligning themselves with FTSE are Railpen, the Merseyside pension fund, the Environment Agency pension fund, RLAM and Aerion.

FTSE said last week that 83% of respondents agreed that FTSE should apply a minimum free float threshold of 25% for UK incorporated companies when determining eligibility for inclusion in the FTSE UK Index Series, which included the FTSE All-Share and the FTSE 100 Index.

FTSE added that it will consult with those who have concerns that the threshold is not adequate about whether a higher threshold would be appropriate,  or whether additional governance standards should be incorporated in the FTSE All-Share Index.

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