A time for experimentation
With the effects of Mifid II being felt across the market, IR departments are sizing up their options. In anticipation of less support from brokers, they are considering the best way – or ways – to fill the gap.
‘Where we’re going in corporate access, in my view, is a hybrid model,’ says Hufton. ‘Brokers will always be the core of the volume but direct will continue to grow as part of the mix, so for IR that means more complexity.’
Recent research underlines that IROs are relying less – although not dramatically so at this point – on the sell side. A net 12 percent of IR professionals globally report a decrease in their reliance on brokers for investor targeting over the last year, according to a survey of more than 200 respondents by IR Magazine. The findings, released in the recently published Investor Targeting report, show that 21 percent report a decrease, 9 percent an increase and 70 percent no change.
Despite Mifid II’s introduction, the biggest regional fall appears in North America, where a net 16 percent report a decrease in broker use for targeting (21 percent decrease, 5 percent increase), compared with a net 11 percent in Europe (24 percent decrease, 13 percent increase).
One trend that links many IR teams today is that they are in an experimental phase. Now is the time to try out new approaches to see what works – and what doesn’t.
Dutch insurer Aegon is a case in point. So far in 2019, the company has toured Scotland using a corporate access platform and tried an independent investor relations firm for a second-tier London roadshow. And later in the year it plans to organize its own roadshow to a city where it knows the investment community well, such as Frankfurt or London. ‘We are trying a lot of different things to see what works best for us, but we haven’t found the silver bullet yet,’ says head of IR Jan Willem Weidema.
A former sell-sider himself, Weidema is aware of the potential difficulties of putting on a successful trip. ‘One thing I know is that the sell side doesn’t have an easy time organizing a roadshow because the buy side can be very unpredictable,’ he says. ‘The first meeting calls you up and says, I can’t do the 9.00 am meeting – can we do 2.00 pm? And then you have to turn your schedule upside down.’
Weidema is also teaming up with other insurance sector IROs to maintain the quality of the events they attend. ‘For far-flung locations, what we try to do is embrace the same conference, so the quality of the event goes up and we see higher-quality investors,’ he says, using the West Coast of the US as an example. ‘The investors know it’s going to be worthwhile because all the European insurance companies are there.’
When it comes to going on roadshows alone, RWE is ahead of the pack: the German company generally deals with Frankfurt through self-directed visits. ‘It’s not that big, and there are only four or five big investors there, so that’s usually fine to set up ourselves,’ explains Grieve.
But now the IR team is broadening its list of locations. ‘We are also doing Switzerland ourselves,' Grieve adds. 'And we have started to do London in a hybrid model, whereby we set up all the one-on-one meetings ourselves, but usually still use a broker for the group meetings. We have not done that yet with the US but we could imagine it working for places like New York and Boston, where we know our key investors very well.’
Grieve is keen to point out, however, that the sell side remains an important source of support, especially for finding new investors or visiting distant locations, such as Asia. ‘We cannot claim we know everybody out there – we don’t,’ she admits. ‘And frankly we do see a benefit in the sell side and its sales people where it is their job to speak to investors, day in and day out.’
Of course, taking on more corporate access internally adds to the demands on IR teams. ‘The easiest thing about using brokers is they take on a lot of the admin,’ says James Collins, head of IR at FTSE 100-listed UK supermarket chain J Sainsbury. ‘To a certain extent, you also use the broker’s knowledge in terms of who you should contact, how you should set up a roadshow, how to set up a meeting. If you bring that in-house, that’s a whole set of requirements you might not have been set up to do beforehand.
‘So for me that’s meant one extra head: we’ve gone from a team of three to a team of four, allocating some of that resource specifically to targeting.’ J Sainsbury has also brought in a technology platform to help with the administration of roadshows, CRM and facilitating feedback.
Collins notes that, regardless of what’s happening on the sell side, he favors dealing with investors directly. ‘I think investor relations is most effective through having clear and direct relationships with the people who own your shares, and the people who potentially own your shares,’ he says. ‘Rather than sit back and rely on someone else to do that for you, we really want to push to do it ourselves.’
