Sell-side meeting costs halve since January

The value of sell-side analyst meetings has fallen by almost half (47 percent) since the start of the year as Covid-19 pushed meetings online, according to new research.

Virtual engagements are valued lower than physical meetings, say researchers from Substantive Research, which surveyed 20 asset management firms across the UK, Europe and the US, with assets under management ranging from $30 bn to $800 bn and a combined $4.9 tn in assets, to find out how attitudes to sell-side meetings have changed in 2020.

Mike Carrodus, CEO of Substantive Research, says that while spend has fallen, demand for data has soared. ‘One of the trends accelerated by Covid-19 is the insatiable appetite for data, research and tools to interpret market events,’ he says in a press statement announcing the findings. ‘Furthermore, we have seen an acceleration in engagement facilitated by ease of access to virtual meetings and events, as there is a lower barrier to entry to attend these meetings.’

Despite the increased demand – and overall satisfaction with the virtual solutions on offer – asset managers simply don’t value virtual meetings with sell-siders in the same way.

‘[Virtual meetings] lack the value derived from the informal side of physical meetings, where questions and analysis that were unscheduled would still be addressed,’ continues Carrodus. ‘Asset managers also recognize the absence of exclusivity from online engagements, meaning that these are valued at a lower rate despite the experience and insight provided. For these reasons, virtual interactions are also generally shorter in duration, which often leads to a lower valuation and payment.’

Substantive Research says there has been a 47 percent drop in value for one-on-one interactions with analysts, while group meetings have seen a smaller but still significant drop of 35 percent. Noting that buy-side budgets for research can vary widely according to company size – Substantive Research gives a range of $1 mn to more than $50 mn for the largest asset managers – the bulk of this research budget (50 percent to 70 percent) is spent on one-to-one meetings.

‘The drop in value applies to asset managers that agree annual all-in prices at the beginning of the year, as well as those that value and pay for research after consumption,’ explains Substantive Research. The firm’s research ‘also indicates that from the start of the Covid-19 crisis, 40 percent of asset management firms that agreed a total research payment in 2020 have since recalculated and reduced their payments to providers in light of market uncertainty and structural changes in research consumption.’

Also quoted in the company statement is Daniel Murray, deputy chief investment officer and global head of research at EFG, who notes that the pandemic has ‘raised the bar’ for asset managers to justify their spend. Speaking at Substantive Research’s virtual Unbundling Uncovered event in October, Murray said: ‘It is clear the market has shown it has the technology available and the willingness to communicate virtually. Seeing the whites of someone’s eyes cannot easily be replicated virtually, however, so there may always be a place for physical interactions.’

This sentiment is also expressed by Caroline Dawson, IR manager at National Grid. Talking to IR Magazine earlier in November, she said that while the company’s fully virtual roadshow in June was certainly a success and that feedback from both management and investors had been positive, virtual does have its drawbacks. ‘It is quite tricky to have a meaningful, ongoing dialogue with somebody you’ve never met in person,’ she said. ‘It’s not impossible and it’s going to become more normal, but I do believe it’s helpful to have met face to face.’