Why Impax Asset Management Group plc's (LON:IPX) Investor Composition Impacts Your Returns

In this article, I will take a quick look at Impax Asset Management Group plc’s (AIM:IPX) recent ownership structure – an unconventional investing subject, but an important one. A company's ownership structure is often linked to its share performance in both the long- and short-term. The same amount of capital coming from an activist institution and a passive mutual fund has different implications on corporate governance, which is a decisive factor for a long-term investor. It also impacts the trading environment of company shares, which is more of a concern for short-term investors. Therefore, I will take a look at IPX's shareholders in more detail.

Check out our latest analysis for Impax Asset Management Group

Institutional Ownership

Institutions account for 86.28% of IPX's outstanding shares, a significant enough holding to move stock prices if they start buying and selling in large quantities, especially when there are relatively small amounts of shares available on the market to trade. These moves, at least in the short-term, are generally observed in an institutional ownership mix comprising of active stock pickers, in particular levered hedge funds, which can cause large price swings. For shareholders in IPX, sharp price movements may not be a major concern as active hedge funds hold a relatively small stake in the company. Although this doesn't necessarily lead to high short-term volatility, we should dig deeper into IPX's ownership structure to find how the remaining owner types can affect its investment profile.

Insider Ownership

Insiders form another group of important ownership types as they manage the company's operations and decide the best use of capital. Insider ownership has been linked to better alignment between management and shareholders. 19.49% ownership of IPX insiders is large enough to make an impact on shareholder returns. In general, this level of insider ownership has negatively affected underperforming (consistently low PE ratio) companies and positively affected the companies that outperform (consistently high PE ratio). Another aspect of insider ownership is to learn about their recent transactions. While insider buying is possibly a sign of a positive outlook for the company, selling doesn't necessarily indicate a negative outlook as they may be selling to meet personal financial needs.

Private Company Ownership

Another important group of owners for potential investors in IPX are private companies that hold a stake of 1.00% in IPX. These are companies that are mainly invested due to their strategic interests or are incentivized by reaping capital gains on investments their shareholdings. However, an ownership of this size may be relatively insignificant, meaning that these shareholders may not have the potential to influence IPX's business strategy. Thus, investors not need worry too much about the consequences of these holdings.

Next Steps:

IPX's considerably high level of institutional ownership calls for further analysis into its margin of safety. This will allow investors to reduce the impact of non-fundamental factors, such as volatile block trading impact on their portfolio value. However, if you are building an investment case for IPX, ownership structure alone should not dictate your decision to buy or sell the stock. Instead, you should be evaluating company-specific factors such as the intrinsic valuation, which is a key driver of Impax Asset Management Group’s share price. I urge you to complete your research by taking a look at the following:

1. Future Outlook: What are well-informed industry analysts predicting for IPX’s future growth? Take a look at our free research report of analyst consensus for IPX’s outlook.
2. Past Track Record: Has IPX been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of IPX's historicals for more clarity.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.