Individual investors account for 50% of Challenger Limited's (ASX:CGF) ownership, while institutions account for 39%

Key Insights

• The considerable ownership by individual investors in Challenger indicates that they collectively have a greater say in management and business strategy
• 48% of the business is held by the top 25 shareholders
• Insiders have sold recently

Our free stock report includes 3 warning signs investors should be aware of before investing in Challenger. Read for free now.

Every investor in Challenger Limited (ASX:CGF) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are individual investors with 50% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Meanwhile, institutions make up 39% of the company’s shareholders. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time.

In the chart below, we zoom in on the different ownership groups of Challenger.

View our latest analysis for Challenger

What Does The Institutional Ownership Tell Us About Challenger?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

As you can see, institutional investors have a fair amount of stake in Challenger. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Challenger's earnings history below. Of course, the future is what really matters.

Challenger is not owned by hedge funds. Our data shows that MS&AD Insurance Group Holdings, Inc., Asset Management Arm is the largest shareholder with 15% of shares outstanding. With 9.9% and 4.9% of the shares outstanding respectively, Apollo Global Management, Inc. and State Street Global Advisors, Inc. are the second and third largest shareholders.

A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Challenger

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our most recent data indicates that insiders own less than 1% of Challenger Limited. Keep in mind that it's a big company, and the insiders own AU$6.8m worth of shares. The absolute value might be more important than the proportional share. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public -- including retail investors -- own 50% of Challenger. This size of ownership gives investors from the general public some collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.

Private Equity Ownership

With a stake of 9.9%, private equity firms could influence the Challenger board. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Challenger better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for Challenger you should know about.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.