‘The changes are evolutionary, not revolutionary’
The variety of approaches to corporate access across the buy side is causing some confusion among IROs. ‘It’s not always easy, especially for smaller IR teams, to keep track of which buy-side firms prefer direct corporate access,’ says Weidema. ‘It makes it hard to know whether you should go through brokers or go direct.’
Anecdotally, IR professionals have reported a few other issues while working with the new teams, such as long waiting times for responses.
‘In terms of responsiveness, I think there will be the same issues going both ways,’ says Davies. ‘There are going to be certain companies that have different priorities from others. There are also going to be periods of time when people are busy doing other things, such as earnings.
‘We have clients that have never reached out before; it’s always been through the broker. And I think that conversation is something very new for both sides in some respects. The corporate access shops on the buy side are helping with that conversation but they are also trying to scale up.’
For both companies and investors, the balance between broker-led and direct engagement is shifting. No one knows how far the pendulum will swing, although few are betting against the sell side retaining a central role.
‘We expect that things may evolve, but we believe brokers will remain important partners,’ says Sanders. ‘Our overall goal is to partner with brokers to leverage their expertise and access while complementing that with our direct efforts to round out the research content for our investors.’
IR Magazine research finds that a net 12 percent of investors saw a decrease in their use of brokers for corporate access over the last year. The changes taking place are evolutionary, rather than revolutionary, says Pellegrino.
‘This is just the first or second innings of this,’ he says. ‘The vast majority of corporate access is still going through the sell side. And it’s very difficult to replicate or change that model overnight.’
Meanwhile, other buy-side firms must decide how they will approach the growing demand for direct contact. Budget constraints will prevent some from hiring internally. As with companies, investors are looking at technological options and IR specialists as part of the solution.
‘I would think most asset managers are going to need some mechanism or other to make sure there is a gatekeeper,’ says Davies.
‘It’s going to come down to how they want their people spending time: do they want their analysts or portfolio managers setting up meetings and logistics? Or do they want them doing research on companies? If you think about it that way, they are either going to bring it in-house or they are going to pay somebody else to do it.’