Large investors on the alert in the face of rising retail investment activity and impact
With the after-effects of the GameStop saga that kicked off the year still fresh in their minds, Canada’s institutional investors are now treating meme stocks and the retail investors driving them as a force to be reckoned with, according to a new report.
In Edelman’s Trust Barometer 2021 report, 700 institutional investors from across the world, including 100 from Canada, were asked to weigh in on various topics.
While many of the report’s key findings focused on ESG issues, part of the study asked the smart money to give their opinion on retail investor activity.
A question about meme stocks sparked a strong reaction. When presented with the statement “meme stocks represent a targeted attack against institutional investors like myself or my firm,” 71% of institutional investors in Canada expressed agreement, including 22% who said they “strongly agree.” Globally, 84% of respondents said they agree.
Other questions suggest Canada’s institutions are wary of a potential uprising in the small investor space. When asked if they were “concerned about recent surges in retail investment activity,” 69% of Canadian institutional investors agreed, with 27% saying they were “very concerned.” Across all regions, 75% agreed with the statement.
Similarly, 60% of Canada’s institutional investors said they were “concerned about the rising impact of meme stock activists,” including 23% of Canadian institutions who were “very concerned.” Among all respondents in the global survey, 75% agreed with the statement.
The high-profile confrontation between large hedge funds and the ragtag investors of WallStreetBets over GameStop has also impacted the strategic thinking behind institutional bets. Among Canadian institutions, around two thirds (68%) agreed with the statement “WallStreetBets and other online communities influence my investment decisions,” with 28% saying they “strongly agree.”
Nearly four fifths of respondents in Canada shared a less charitable view. Seventy-eight per cent of Canadian institutions agreed that “WallStreetBets and other online communities can create false markets,” and around one fifth (18%) said they “strongly agree”.
