Pension and investment funds' ownership of companies through their equity investments may soon come under EU scrutiny. The EU Commissioner for Competition Margrethe Vestager wants to investigate if the control that large funds have as shareholders impedes competition in several business sectors, Danish financial news service Finans reports.
The Commissioner’s thesis, which is supported by academic research in the US, is that if an entity such as a pension fund buys a large equity stake in firms operating within the same business sector, then the competitive drive of those companies may be stymied, preventing consumers benefiting from cheaper prices.
“If a group of very large funds buys up the shares of the largest companies in a certain business sector, what happens with competition? If they as a whole own 20-25 percent of the largest firms in a given sector, then it might not be in their interests to compete in areas such as prices,” says Vestager.
However, she stresses in the report that she does not yet know whether this is a real problem.
English edit: Daniel Frank Christensen