European experts leading the way

Buy and sell side after the crisis

Sell-side woes
‘No one wants to be an analyst any more. In terms of the sell side, no one new is appearing in the analyst community. This is a big challenge and there will need to be serious investment in this area.’

SWFs
‘If sovereign wealth funds want something, they come to you. We went round when we were doing our capital raising, but they weren’t interested. In any case, they aren’t that useful at the moment. They’ve had a bad time with their investment in banks.’

Pastures new
‘Get off the beaten track. Scandinavian investors are always happy when we go to see them. We get a similar reception in Toronto.’

Investors retreat
‘Structurally, the crisis led to a concentration of domestic ownership. This was most prevalent among the small and mid-caps, where foreign institutional money basically repatriated itself.’ 

Reverse broking
‘We’ve had a problem with reverse broking, when a hedge fund pushes negative news about your company to the brokers. In this situation, I ring up hedge funds I know to try to push back against the reverse broking.’

Raising capital

Mixed messages
‘The capital raising was difficult. We’d been telling the market we were one of the best-capitalized banks – and then we went to market anyway. It sent investors mixed messages.’

Watch the bankers
‘Stay in control and don’t let the bankers or lawyers take over. It’s important to keep hold of your responsibilities during a rights issue. You may have some 25-year-old investment bankers who want to write out a new strategy to justify the issue – fund managers will notice this.’

Ratings analysts
‘Credit ratings analysts are still important. How do we deal with them? We make them insiders on a tacit basis. The quality of their reports is generally worse than that of the sell side. We go through the reports and mark them up before they go out.’

Debt IR innovation
‘We have a relatively innovative model. In our company, the person responsible for fixed-income issues is based within the IR team but reports to the treasurer, and we’ve found this works very well – although every IR department does things differently.’

More context please
‘Companies should talk more about ratios and give contextual information. Some put up all their debt covenants on the website, but others just say, If you want to know more, ring the treasury department.’

Measuring the value of investor relations

Educating your colleagues
‘A colleague of mine saw one of our peers in the ‘top stocks to buy’ list of an investment magazine and asked me what was going on. When I saw it, I explained that it was a list of the top-income stocks – and that we don’t pay out dividends.’

Competitive intelligence
‘To do a good job in IR, you have to be very aware of where you are positioned in the competitive landscape. You have to understand the valuation of different sectors and how your competitors are doing compared to you. It’s important to place yourself in the context of your industry and your competitors.’

Performance metrics
‘Finding a way to measure the performance of IR is the holy grail of the profession. The real problem of IR is that it’s pretty much regarded as a cost center. Even the treasurer can turn around and say, I’ve saved you X basis points. The tax guy can say that, too. But it’s difficult for the IR director to say, I’ve saved you this amount of money or I’ve created this amount of money.’  

IR’s effect on volatility
‘Anybody who says, I’m going to get more growth investors and fewer hedge funds is dreaming as far as I’m concerned. When it comes to volatility nowadays – when you’ve got options coming out on exchange-traded funds – it’s very difficult to control. Where there’s uncertainty, which there was in November and December last year, you ride the moves.’

Internal reporting
‘One IRO joined our company from a consultancy and started writing huge reports for management, until she realized no one was reading them. Now the reports are just one page and can be read on a BlackBerry.’

Credible with management
‘A good IRO has trust and credibility with the senior management team. The good guys have the gravitas and the status to be able to talk to the board and give it the real story. It’s the IR director’s job to give a really unvarnished picture to the management team of what the city thinks of the company. At times, this will involve giving unpleasant news.’

Who are the Euro Leaders?
The Euro Leaders are members of an exclusive group of the UK and continental Europe’s best investor relations professionals, as identified by the investment community in independent perception studies. The methodology explaining how we selected the individuals who comprise the 2009 Euro Leaders is available on the IR magazine website.

IR Magazine Think Tanks are free, invitation-only events for senior-level corporate IROs. The next one will be in Stockholm in October. For more details, please see www.irmagazinethinktank.com.