There's more to Stockholm than saunas and smargasbords. Double dot your a's and o's and you could find some funds to chase, too
Scandinavia is mobile telephone land. Nowhere is that more evident than in the affluent streets of Stockholm. Every other conversation is interrupted by a muted ring followed by the all too familiar frantic scramble in pocket or bag. Ericsson and Nokia have the local populace hooked on staying in touch.
The Swedes may be good communicators in one sense, but they are not famed for their openness in another field. Investor relations still has to really make its mark. Erik Ã…fors of Gramma, one of the few investor relations agencies in Stockholm, comments that 'investor relations remains a marginal industry in Sweden. Strategic investor relations advice probably wasn't around here five or so years ago.'Sure, there are the big, international players - back to Ericsson again - the top 20 companies whose IR teams can hold their own with the best practitioners in the world. But below that select group an annual report and occasional investor presentation is usually seen as adequate. Oh yes, the CFO is available on the phone, too.
Mind you, Sweden probably doesn't spring to mind when fund management is being discussed either. There are not many companies which include Stockholm as a stop-off on their European roadshows. Perhaps they should.
According to the latest figures from Technimetrics' International Target Cities Report, institutional equity under management in the city shot up by over 60 per cent last year to around $89 bn. That ranks it as the seventh largest equity management centre in Europe. It may still be well behind the London, Zurich, Geneva elite, but it's also well ahead of centres such as Basel, Amsterdam and Milan.
Let's put that into perspective. If you're looking for a quick roadshow skip round Europe you will undoubtedly mop up the bulk of funds by visiting London, Zurich, Geneva, Paris, Frankfurt and Edinburgh. If you want to expand your company's European shareholder base further and want some more centres to visit, Stockholm should probably be on your list.
That's especially true of companies with blue-chip peers in Sweden or Scandinavia as a whole: particularly in sectors like telecoms, pulp and paper or banking. Stockholm's fund managers understand those businesses well and they have the money to put the way of international companies which come to court them. Technimetrics reckons that some $25 bn of the equity funds under management in the city is up for grabs by non-domestic companies.
Swedish fund management has grown exponentially in the 1990s for several reasons. Fears that the government will be unable to sustain its legendary generosity in social security hand-outs for much longer have stimulated private savings. The dominant weight of the state pension fund is slowly being eroded as money is switched into private plans. One ex-fund manager points out that he has even set up a private pension plan for his 18-month old daughter and does not think that is too rare. It's not so much a state of panic - more a recognition that the government will not necessarily be there in the future to offer support.
Indeed, the government has actively encouraged those moves. A few tweaks of the heavy tax burden here; a few regulatory shifts in the savers' direction there. Money in mutual funds has spiralled as a result and the money managers are increasingly allowed to direct their investments abroad. And, for the most part, the money is not going into safe and secure bonds as in Italy and Germany. The Swedes want growth; if that entails higher risk then so be it. This is one continental European country with a strong equity culture (the private shareholder association has over 100,000 fully paid-up members) which is not shy of looking abroad if growth opportunities are not available at home.
Ulf Lowenhau, a director at Carta Corporate Advisers, says that much of the increase in international investment out of Stockholm has gone into smaller cap companies. 'It's not just the blue chips that the fund managers are going for,' he says. 'We've got them at home. In many cases, the reason for going abroad is to find companies with an upside: the slightly smaller cap companies with potential for high growth.' Lowenhau believes that any size company which took the trouble to come and present to fund managers in Stockholm would be very well received. 'They would be showing an openness to investors.'
Lowenhau might be right. Certainly, the domestic small and mid-cap companies have been having a good time of it lately. But there are not many good domestic opportunities available: venture capital does not exactly thrive in a punitive tax environment. Those smaller caps that do succeed often remain dominated by a founding shareholder, which restricts the investment opportunity. So fund managers looking for growth are being squeezed into foreign investment; and many looking at international companies are specifically targeting growth companies. Take S-E Banken Fonder, the fund management arm of one of the country's leading banks. A third of its $8 bn or so of funds under management is in foreign equity, a good chunk of which is outside of the blue chip companies.
According to Johan Brostrom, a fund manager at Hagstromer & Qviberg, foreign companies visiting Stockholm have a distinct advantage over their Swedish brethren. 'I think that American companies have a longer tradition of talking to investors than the Swedish have,' he says. 'They are more skilled at telling what they want to tell, although the larger Swedish companies have been getting quite good at that, too.'
Many foreign companies which do visit Stockholm have reaped the rewards from the support of stable, long-term investors. Several locally-based fund managers report that they often prefer to use hedging instruments to manage their exposure to a market or stock which worries them, rather than ditch holdings once an investment decision has been made.
But, be warned: if you are travelling to Sweden to sell your company story to analysts and fund managers then be prepared to play by their cultural rules. Lowenhau again: 'Swedes are very direct and not prepared to talk in general terms. I go into meetings where there's no small talk at all - we don't have the social niceties of other cultures. Analysts want you to get to the point very quickly.'
Long rambling presentations with a lot of historical background are unlikely to gain much respect in Stockholm. Hit them with bullet points, says Lowenhau: who you are, what you do, what makes you different from others, what the future holds. 'The basic rule is no bullshit. They want to know where the meat is in each hamburger. And they don't want things to be too flashy,' he says.
Fund managers request that international companies coming to Stockholm for the first time do a quick presentation and leave enough time for a good period of questions and answers. The select few which have holdings - or are potential large investors - can then spend more time with the company in a one-on-one situation, leaving the remainder free to escape and consider their notes. One fund manager says that Swedes are unlikely to walk out of a presentation if they feel it is taking too much time, but may feel disgruntled that their time has been wasted. Not the best way of gaining investors for the future.
Brostrom at Hagstromer & Qviberg suggests that for growth companies it can be just as useful for an investor to meet the manager of research and development as the chief executive to get a handle on where a company is going. Senior management can always keep in touch by teleconference to limit their time commitment.
Whatever the method of approaching the Swedish market, make it regular. Too many fund managers complain that non-domestic companies with good stories will visit Stockholm once with the backing of, say, a Morgan Stanley or Goldman Sachs team, then forget all about those they have tempted with their story.
'Some foreign companies at least have an ambition to maintain a continuing dialogue,' says Brostrom. 'It would be very nice if I could look at my calendar and know that every January 15th Motorola or somebody like that will come to do a company presentation here. Companies are getting better, but they should develop some kind of regular schedule so that you know when they are coming.'
The idea of being suspicious of companies which try to be too flashy is echoed around the city's financial community. Non-blue chips presenting in expensive, premier venues such as the Grand Hotel would be likely to raise a few eyebrows. Far better to choose a more independent, cheaper venue such as the stock exchange. That gives a business-like impression rather than relying on opulent surroundings to impress. Use a financial communications agency with local offices which knows the ropes, such as Gramma, Wildell, Carta or Burson- Marsteller, in the first instance.
Similar advice applies to the choice of restaurants. For a constructive one-on-one over lunch try booking a table at the Teatergrillen next to the Royal Theatre. The service is fast, the food is good, the tables are well-spaced - good for secretive discussions - and it is not considered too flashy. The Wedholms Fisk gets similar praise and is described by one fund manager as professional without being over-the-top.
In contrast, lunch or dinner at the Operakallaren might be exceptionally good for the palate - it is widely considered to be the finest restaurant in the city - but risks being seen as verging on a bribe by many of the city's fund managers and analysts. A meal at the French Veranda in the Grand Hotel may lead to similar conclusions.
If you have the time and inclination on a non-diarised Friday evening in Stockholm then it is worth paying a quick visit to Tures for a drink. This is where many of the 1,000 strong financial community sink a few beers at the start of the weekend and swap stories about, say, the latest international company doing the presentation rounds. Besuited and dominated by males, it is probably the only time of the week that you will catch fund managers and analysts seriously at play with alcohol. There is little drinking during the week, either socially or during business engagements. And the two areas are kept very separate, too. Inviting a fund manager to bring their partner along to a business dinner will not necessarily be frowned upon - but it probably won't be greatly appreciated either.
In summary, to make a roadshow visit to Stockholm worthwhile do not attempt to inflict your own business culture upon the Swedes. Follow their rules instead and your company could well benefit from the increasing pool of international equity available in the city.
And don't forget your mobile.