What to do when a fund manager says no

This article, which discusses why you should persevere with reluctant fund managers, was sponsored by HSBC

Have you ever been in a situation where your chief executive asks why you are meeting a fund you have already seen multiple times, despite it never having bought your stock?

If so, how do you respond? One standard answer is: ‘It has $x bn in assets under management so if it does buy, it will really move the needle.’ This doesn’t always convince company executives, however, so the question becomes: how many times should you see a fund before giving up?

As a broker, we are often asked this question by companies before a roadshow. It’s a common stipulation from companies to skip certain funds. If a fund wants to meet with you on a roadshow, there are generally only a few reasons why.

Let’s assess those reasons and think about whether it’s actually worth your while going to the meeting.
1. The fund is already a shareholder – definitely worth seeing.
2. It is interested in buying your shares – always worth a meeting, irrespective of how many times you’ve already met with it.
3. It is interested in shorting your shares – worth a meeting as this could be your chance to convince it otherwise.
4. It wants to data mine because you are a key piece of a supply chain or can provide industry data – debatable. This is probably one you should take, rather than involve senior management. The fund can often give you feedback on what it’s seeing in the industry through its lens.
5. The fund is seeing you as a favor to the broker, often because brokers have difficulty filling a schedule for you – honesty is the best policy here. It is likely not worth a meeting. Quality is more important than quantity.

How do you determine which category a meeting falls into? Lean on your broker for intelligence. We speak to these clients every day and are best positioned to comment. We could only damage our franchise by setting up fruitless meetings.

Regardless of the category, you should always begin your due diligence process with screening a fund by assets under management. The key question is: can it buy your stock in size?

If you’ve made it this far and meet with the fund, sometimes it won’t buy your stock despite seeming very interested. Don’t get disheartened. This could simply come down to portfolio positioning or timing – perhaps the analyst or portfolio manager is looking for the right entry point.

Sometimes it can simply be a case of ‘it’s not you, it’s me’. But try to avoid the case of ‘maybe he’s just not that into you’.

Alex Lupis is director and head of corporate access for Asia-Pacific at HSBC.

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