Going beyond the data
For IROs everywhere, information about prospective shareholders is the Holy Grail. This information is the basis of key targeting decisions, including who should be invited to investor days and which cities to visit on the next non-deal roadshow.
Adrian Rusling, partner at the London office of Phoenix IR, points out that even in a market like the US, where investors have to file 13Fs, the data is stale because ownership information is filed 45 days after the quarter ends.
‘IROs today are data-driven, which is noble, but the problem is that if you put in bad data, you’re going to get bad targeting ideas coming out the other end,’ says Rusling. ‘At best you’re looking in the rearview mirror, and some of that data will be flawed – so you shouldn’t base your decisions solely on it.’
Mark Simms, CEO of Capital Precision, agrees. ‘Information in most targeting databases is information in the public domain as a result of filing,’ he explains.
‘By its very nature the information is quite historic and mainly covers the mutual fund industry. You’re not getting what the hedge funds, sovereign wealth funds (SWFs) or even insurance, private wealth or pension funds are doing.’
Relying on public domain information flashing on a Bloomberg screen can be a problem for an IRO, Simms emphasizes. ‘Data can send you 180 degrees in the wrong direction,’ he adds.
For example, many IROs flock to Italy because Milan and other cities are over-represented on targeting databases. ‘Italy benefits because it’s mainly a mutual fund market and so the level of visibility is extremely high,’ says Rusling.
On the other hand, Switzerland and Scandinavia are woefully under-represented on roadshow itineraries simply because of insufficient targeting data about private banking for high-net-worth individuals.
Rusling also points out that some SWFs act in almost complete secrecy. He explains that while Norges Bank publishes its holdings in its annual report, many other SWFs aren’t as forthcoming.
Targeting in the wilderness
Seasoned IROs know targeting in Europe is more difficult than in the US. ‘There’s a gap in the data you can get on investment firms in Europe compared with investment firms here in the US,’ says Jeff Smith, Federal Express’ director of investor relations for Europe and the US East Coast.
He has tried to tap into many different data sources for Federal Express’ two to three investor trips to Europe each year. Smith regularly visits private accounts in Switzerland, as well as SWFs in London, Norway and even the Middle East.
Alison Owers, CEO for EMEA at Orient Capital, points out that the lack of data can be a problem for targeting institutions, but it also makes researching other companies in one’s industry more challenging.
‘When one of your peers is a Swiss company and you’re trying to find out information on its holders, it’s not going to be as straightforward as finding data for a US or UK company, which you can get through feeds from public information on quarterly filings or notifiable interests,’ she explains.
Owers, therefore, advises companies to get creative. ‘It could become a push-button exercise of going to your broker every time you’re putting together a roadshow,’ she says.
‘In order to ensure you are making the most of your management’s time, try to treat this with a clear mind and use as many sources of information as possible so that you can make an informed decision on who you are seeing.’
Understanding that ownership information is partial at best, consultants employ different methods to gain better insights. ‘Whenever we do share ID for a company, we look at fund flows,’ says Simms. ‘We try to identify the funds buying at that precise moment in time.’
Phoenix IR believes in conducting regular conversations with as many money managers as possible – especially those that typically fall through the cracks. Rusling points out that poor targeting data creates all manner of problems: not only might an IRO be missing opportunities, but he or she might also dramatically underestimate the assets of the managers being visited.
‘You have a lot of partial filings out there,’ Rusling says. ‘A US issuer might see the mutual fund positions and still visit the manager [without knowing of pension or private-banking investments]. Later, the IRO will say, Oh my goodness – it has four times the amount of money I thought it did.‘
Although secrecy is part of the cachet of Swiss banks, many of these managers are frustrated that companies rarely come to visit – even when the managers hold sizable stakes.
Rusling says he’s had conversations with pension fund managers who won’t reveal their holdings but still wish for greater contact with IROs. For industrious investor relations teams, such funds present a tremendous opportunity.
Smith acknowledges that securing meetings with SWFs in Abu Dhabi and Dubai is a ‘tougher’ prospect than securing meetings with other managers, and it usually takes multiple meetings to develop a relationship – but the efforts, he believes, are worthwhile.
He points out that these managers, especially if they have global or US-targeted funds, are concerned about being so disconnected from US companies. ‘They value when a company or management team visits them and gives them in-person updates on a regular basis,’ he explains.
What’s more, these funds are attractive additions to a firm’s shareholder roster. ‘[SWFs and private fund managers] have longer time horizons and strong inflows,’ concludes Smith.
‘Whatever you can do to establish a relationship and be top of mind with officers of those funds could have benefits for many years to come.’