Accessing the market with BNY Mellon

Sep 11, 2014
<p>The DR bank explains how it has been connecting issuers and investors</p>

This year has seen the issue of corporate access debated by regulators, analyzed at IR events and reinvented by a slew of new tech offerings. But one service that has been little publicized is BNY Mellon’s Market Access service, aimed at connecting its DR clients with new investors.

‘We’re different from other players on the street,’ says Guy Gresham, head of global IR advisory at BNY Mellon Depositary Receipts, explaining that the service has ‘organic’ roots. BNY Mellon has seen a drop in the percentage of investor outreach organized by the brokerage community – down from 91 percent in 2010 to 71 percent last year, according to the bank’s own research – leaving some of its DR clients struggling to get in front of the right investors.

‘That [decrease] can be attributed to two factors: ever since the global financial crisis, the brokerage community has evolved and, to an extent, no longer provides the same level of services for all companies, so the tail-end of market capitalizations have to compete a lot more fiercely themselves just to get in front of investors,’ says Gresham. At the same time, some of BNY Mellon’s larger clients have been ‘taking some corporate access activities in-house’.

Over the last 10 years or so, ‘there has been about a 75 percent increase in the number of institutional investors in North America that are investing globally,’ Gresham explains – and that’s what the Market Access service is tapping into.

While Gresham emphasizes his belief that the ‘brokerage community is serving a fundamental purpose working with companies’, he also notes that ‘[brokers] are not necessarily incentivized to take into consideration the full breadth of viable, long-term investors for corporates, as these simply aren’t all great clients for them.

‘There are particular investor segments that are completely overlooked in terms of corporate access but that are strong consumers of equity. What we want to do is ensure that if a corporate is looking at North America or western Europe or wherever, it is really looking at the investable market in its entirety, not just the segment of it that’s paying the brokerage community.’

Minding the gap

Gresham’s colleague Amy Salomone, vice president and senior market access specialist at BNY Mellon Depositary Receipts, explains that the service originally evolved out of a lack of interest in BNY Mellon’s western European telecoms clients. ‘When they were coming to the US for roadshows, their schedules were not being filled, or they were seeing very small institutions,’ she says. ‘We needed to fill that gap.’

That was around three years ago. Since then, the service has been expanded to offer access to European markets as well and, with around 1,600 issuers, covers a large part of the market. ‘In terms of our issuer base, we’ve worked with issuers from every sector, every market cap and every region outside of North America,’ Salomone says.

Putting it simply, ‘[the service is] helping to facilitate where the sell side falls short,’ she adds. ‘We’re doing traditional non-deal roadshows but we’re also connecting [clients] with other members of the investment community as well helping them to get their story out.’

For example, she says that while New York and Boston are the popular locations for brokers – because of the large institutions based in those cities but also because large amounts of commission cash are generated by these hubs – BNY Mellon also looks at investment opportunities elsewhere. ‘The reality is that on an international, actively managed basis, California is just as large as Boston and New York, depending on the day of the week,’ Salomone says. ‘We’re the people taking issuers to California for the first time.’

And Gresham, Salomone and the rest of the Market Access team are happy to help out even where someone else is facilitating access. ‘We’re also a resource,’ explains Salomone. ‘If we’re not taking [a client] on the road but it needs us to give an unbiased opinion on its schedules, to look at different investors or at who else is in a market it’s going to, it gives us a call.’

As well as benefiting the bank’s DR clients – which in turn benefits BNY Mellon – Salomone says Market Access has ‘helped the institutional community better understand the DR product. It also helps us with the institutions. They can come to us when they have issues with corporate actions, when they want to know about regulatory changes, anything along those lines.’

Casting the corporate access net

Speaking to IROs from two very different users of BNY Mellon’s Market Access – Tiago Domingues Fernandes from Brazilian pulp and paper firm Suzano, and Ken Lawrence, vice president of IR for North America at oil and gas giant Shell – both praise the results so far.

‘With BNY we enjoy more flexibility and neutrality to determine the investors we want to visit,’ says Fernandes, who first started using the service after BNY Mellon offered to organize a non-deal roadshow in Boston for the Salvador-headquartered company. ‘We found it an interesting, complementing alternative to non-deal roadshows organized by the broker-dealer.’ The bank has since ‘introduced us to several new, large investors in Boston and Chicago that were not within the company’s reach,’ he adds.

‘BNY Mellon doesn’t have any particular bias for who we meet and works closely with us on targeting – using our data and its knowledge of the investors – unlike brokers that want to cater to their clients and tend to work harder for C-suite meetings than IR-only meetings,’ Lawrence points out.

While ‘Shell’s corporate access in the US had typically been arranged through brokers or an IR agency when not managed internally’, Lawrence also praises BNY Mellon for introducing something new. ‘It recently set up a luncheon for brokers and wealth managers to target retail institutions and we were very impressed with the turnout.’

So what’s the future for BNY Mellon’s take on corporate access? ‘[Market Access] has been generating more interest,’ says Salomone. ‘Last year we were up more than 30 percent; so far this year we’re up more than 40 percent in the first half and we’ve been so busy we’ve expanded the team.’

BNY Mellon has an event planned with members of the MS Sahoo Committee ‒ originally tasked with reviewing India’s DR scheme, which was put in place in 1993 ‒ to help connect investors to the Indian market, so perhaps the team now has its sights set on Asia.

‘[Clients] know they can trust us because, ultimately, getting them in front of the right investors is our ultimate goal,’ Salomone explains. ‘As we’re not being remunerated, we’re able to cast a wider net and catch a lot more fish.’

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