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The Monthly: April 2024

02 Apr 2024 / Corporate research

Feature article:

Steady as she goes, but could be better

A review of investment company liquidity since 2016

Liquidity is the lifeblood of equity markets. The measurement of liquid asset availability to a market or company is a way of gauging a market’s health.

This article builds on our previous work, which analysed the liquidity data for non-financial trading companies, by applying the same analytical techniques to the investment companies (IC) space. We analyse liquidity for ICs as a whole and compare traditional with alternative ICs; as well as interrogating the data in market capitalisation baskets and, finally, by AIC sector.

Liquidity for ICs has not seen the sharp decline experienced by quoted trading companies. However, typically, it is lower than that for trading companies. Having noted the steady liquidity across time for the IC space as a whole, our work does show that there seems to have been a decline in that for the smallest ICs; this is part of the pressure on these boards, forcing mergers. We consider the consequences of falling liquidity, and suggest ways IC teams could improve liquidity in their shares to become more attractive to investors; many have recognised the positive impact that sponsored research can have.

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