When we founded Edison over 20 years ago, there was a thriving small- and mid-cap institutional and private wealth community actively engaging with companies across the market spectrum. Now, regulatory changes, high-profile events like the Woodford scandal and evolving investment strategies have pushed institutional investors steadily up the market-cap scale, creating a significant void in the small- to mid-cap space.
This institutional migration has coincided with another critical trend: the rise of passive investing. As active institutional participation decreases (particularly for smaller companies), retail investors are increasingly filling this vacuum and, for listed companies, engaging with this growing shareholder base is now essential.
This is not just a UK trend. In March 2025, the World Economic Forum (WEF) published its 2024 Global Retail Investor Outlook, which shows the same trend globally.
Exhibit 1: Global assets under management by channel
Source: World Economic Forum. Note: Retail channels include retail and private banks, financial advisors, family offices and self-directed investors.
A number of our clients see 20% to 30% of their shares traded in the UK via the Retail Service Providers platform, where banks and brokers provide electronic quotes to the platforms, such as Hargreaves Lansdowne and AJ Bell for their retail customers. This may not seem significant, but companies are ignoring the largest active market in their shares by ignoring retail. Why? Typically, 50% of the volume in the shares of a company is related to market-making activity, high-frequency trading and proprietary trading desks. The other 50% is retail and institutional. With institutional money typically now 50% passive, in the example of a company with 20% of its shares being traded by retail, the active institutional component would be 15% and the remaining 15% would be passive institutional flow.
One of our clients has recognised and benefited from understanding this. A relatively new management team has been turning the business around for the last three years and doing a good job of improving the financial performance of the business. A year into the turnaround, the institutional road show was one that many a management team has experienced: lots of belief, support and congratulatory messages from the institutions they met, but zero buying. On reflection, they decided to actively engage with the retail market and the result over two years has been a doubling in the share price.
In recognising this new pool of capital and its importance, we are busy revamping our content suite to meet the needs of a smart, but time-poor retail audience who typically like to consume bite-sized content on the go from trusted sources. Look out for it.
The institutional investor retreat
The data tell a compelling story. Institutional channels’ share of assets under management declined from 55% in 2014 to 48% in 2021, with projections showing a further decrease to just 39% by 2030 (WEF, 2025). Even more significantly, an increasing portion of this institutional money is passive rather than active, meaning the pool of institutions actively analysing and investing in smaller companies is rapidly shrinking.
According to Richard Penny of Oberon Investments, ‘For companies below £200m, there are probably fewer than 20 institutional investors who will invest a couple of million pounds or more.’ This retreat has created a substantial opportunity, and necessity, for retail investor participation.
The new wave of retail investors
Retail investing is undergoing a remarkable transformation. Stock trading app usage is projected to grow at a compound annual rate of 20% between 2016 and 2025, creating an entirely new ecosystem of market participants (WEF, 2025).
This growth reflects fundamental demographic shifts. Survey data show that 58% of Gen Z individuals start learning about investing before entering the workforce, compared to just 21% of Baby Boomers. These younger investors demonstrate earlier market participation, greater openness to diverse asset classes and more comfort with technology-enabled investment platforms (WEF, 2025).
The impact of this generational shift will be amplified by ‘the great wealth transfer’, which is an estimated $124tn in assets expected to change hands by 2048 as Baby Boomers pass wealth to younger generations. Most significantly, retail investment channels are expected to account for 61% of total assets under management by 2030, generating 67% of the sector’s revenue (WEF, 2025).
How retail investors add value
Retail investors offer distinct advantages that listed companies would be wise to pay attention to:
1. Enhanced liquidity: retail investors provide crucial market liquidity, especially during periods when institutional investors pull back, as demonstrated during the early months of the COVID-19 pandemic.
2. Values-aligned investing: 70% of Millennials choose investments based on alignment with their personal values, compared to 51% of Baby Boomers (WEF, 2025). This can translate into loyal shareholders who support companies whose mission they believe in.
3. Brand advocacy: when individuals invest in a company, they frequently develop stronger connections to its products and services, creating powerful network effects for consumer-facing businesses.
4. Stable funding: retail investors often maintain longer holding periods and provide more stable funding through market cycles than some institutional investors driven by short-term performance metrics.
The rise of retail coordination
Today’s retail investors are increasingly organised and coordinated. Social media platforms, online forums and specialised investment communities have transformed how retail investors gather information and occasionally coordinate action. One in four Gen Z and Millennial investors uses social media for investment information, while 37% turn to friends or family for guidance (WEF, 2025).
This coordination extends beyond trading to corporate governance. Among Gen Z investors, 38% reported having engaged with shareholder activism campaigns, compared to just 9% of Baby Boomers (WEF, 2025). This suggests retail investors increasingly see themselves not just as traders but as owners with a voice in company direction.
Strategic approaches for companies
Companies looking to effectively engage retail investors should consider several strategic approaches:
- Enhanced digital communication: modern retail investors expect seamless digital communication. Interactive investor platforms that enable direct exchanges between retail investors and companies have been shown to enhance price informativeness, liquidity and overall participation.
- Investor education initiatives: with 70% of investors saying they would invest more if they had more opportunities to learn how to invest, companies can create educational content about their industry, business model and investment proposition (WEF, 2025).
- Values-based narrative: develop an authentic corporate narrative that resonates with values-driven investors, recognising the power of word-of-mouth and social sharing in driving investment decisions.
- Simplified disclosure: address the 26% of investors who avoid certain investments because they ‘don’t understand them well enough’ by creating tiered disclosure with simplified summaries of key information (WEF, 2025).
- Direct engagement opportunities: consider virtual shareholder events, executive Q&A sessions and retail-focused investment conferences to build direct relationships with this important investor base.
Conclusion
As institutional capital increasingly moves toward passive strategies and larger capitalisations, retail investors represent the most vibrant active segment of the market. The data is clear: retail investment channels are expected to dominate assets under management by 2030.
For listed companies, particularly in the small- and mid-cap space where institutional coverage has diminished, developing a comprehensive retail investor strategy is no longer optional – it’s essential. The companies that thrive in this new landscape will be those that recognise retail investors not as an afterthought but as sophisticated stakeholders worthy of targeted engagement.
By building these relationships now, companies can establish a loyal shareholder base that provides stability, liquidity and advocacy in an increasingly complex market environment. The democratisation of capital markets represents one of the most significant shifts in finance in a generation and, for companies willing to adapt, it offers an unprecedented opportunity to build a diverse and supportive shareholder base for the long term.
