Roadshow guide to Chicago

With the coronavirus outbreak affecting corporate and investor calendars worldwide, companies are unlikely to be traveling to Chicago for roadshows over the coming months. IR Magazine is also not recommending that any companies head out on the road at this time. But we hope this guide will serve as a useful research document for planning future trips or conducting virtual meetings with the city’s buy-side community. 

The top three non-deal roadshow destinations in the world are New York, Boston and London. But what comes next? 

Each year, IR Magazine polls several hundred IR professionals, asking them to name the cities they have visited on roadshows over the last 12 months. With this information, we produce the top 20 list of most-visited cities, which can be found in the IR Magazine Global Roadshow Report 2019. 

While the top three cities stay the same year in, year out, the next spot tends to switch around. In our most recent survey, Chicago took fourth place.

In 2019, 39 percent of IR professionals globally visited the Windy City at least once on a roadshow, according to the report. Chicago has a similar number of visitors annually as San Francisco (38 percent), Toronto (36 percent) and Frankfurt (34 percent).

The city is understandably more popular with North American respondents: nearly one in two IROs (49 percent) based in the US or Canada stopped off in Chicago last year.

Highlighting its appeal to IR teams, it is also the seventh most-visited city globally among European respondents and 10th most-visited among Asian respondents. 

‘Chicago is a great market for non-deal roadshows as it is home to prominent long-only investors as well as some of the largest hedge funds,’ explains Donni Case, managing director in the Chicago office of Financial Profiles, a strategic communications firm. 

‘Given the depth, breadth and variety of the investor base in Chicago, it is a great destination for companies ranging from small to large cap and across industry sectors. Regardless of your travel itinerary, Chicago can be a worthwhile and easy visit.’

Passive drift 

Chicago, like the rest of the US buy-side community, has found it hard to resist the allure of low-cost, passive investment. Over the last decade, some major long-only investors have shifted their approach to passive strategies.

Out of the total equity assets under management in the city, 62 percent are managed on a passive basis, according to data from IHS Markit.

Top passive investors in Chicago

Source: IHS Markit

As IR teams are more than aware, passive investors still require active engagement. ‘Passive investors generally focus on a company’s long-term risks, opportunities and plans for value creation and ESG-related issues,’ says Case.

To manage engagement activities, passive investors, including those in Chicago, have spent the last few years adding to their stewardship teams.

Invesco has been one of the most aggressive hirers, with its stewardship team rising from five to 14 people between 2017 and 2020, according to an analysis by the Financial Times.

Active approach

Despite the shift to passive, there are still ‘a significant number of active, long-only managers in Chicago,’ says Case. She name-checks Harris Associates, LSV Asset Management, William Blair & Company and Ariel Investments, along with growing firm Segall Bryant & Hamill.

Top active investors in Chicago

Source: IHS Markit

Looking at Chicago’s buy side by investor type, the next biggest group after index is value. Value investors account for 14 percent of total equity assets under management, a figure that jumps to 35 percent of actively managed assets, reports IHS Markit. 

‘When you focus specifically on the active firms in the area, you will notice that there is a concentration of equity assets under management held by value-oriented investors, led by Harris Associates, BMO Asset Management, Nuveen Asset Management and PPM America, among others,’ says Christopher Stroh, director of situational analytics, research and analysis at IHS Markit.

‘Chicago also remains a destination for many real estate investment trust and utility issuers due to specialty income investors like RREEF America and Duff & Phelps.’

Keeping the focus on just the actively managed equity assets in Chicago, IHS Markit data shows that the majority of funds go to companies in North America (81 percent), followed by Europe (13 percent) and Asia (4 percent).

The most popular sectors, meanwhile, are technology (18 percent of active investment), financials (16 percent), consumer services (14 percent), healthcare and industrials (11 percent each).

For some companies, especially smaller ones, getting a full day of meetings with long-only investors may prove tricky, says Case. As a result, she suggests expanding your horizons to the wider region. ‘Consider supplementing with meetings in the Midwest, in Milwaukee and Minneapolis, which also have some excellent investor targets,’ she says.

Hedge-fund haven

Along with passive investors and long-only institutions, the third key constituent of Chicago’s buy-side landscape is hedge funds. ‘Top-tier hedge funds in Chicago include Citadel, Balyasny and Alyeska as well as many smaller firms,’ explains Case. 

‘If you are including hedge funds, think about how you want to engage the Chicago hedge fund community as it is a big part of the landscape. Potentially think about setting up a lunch with multiple hedge funds, as most hedge funds here know each other well.’

Citadel is the only investor classed as ‘alternative’ in style that makes it into Chicago’s top 10 firms, according to IHS Markit. But looking across all active equity assets, alternative investors make up 21 percent of investment, the second-highest proportion after value. 

‘Given the large number of hedge funds in Chicago and the significant assets they manage, it’s worth reviewing the list and investment parameters of these funds to determine whether meeting some of them might make sense,’ says Case.

Meanwhile, Chicago’s biggest hedge funds punch above their weight when it comes to securing meetings with companies. 

‘When looking at meeting data, Balyasny, Alyeska and Citadel represent three of the top five investors meeting clients in Chicago while the remaining top two spots are held by aggressive growth investor William Blair and Garp investor Columbia Wanger,’ says Stroh.

If you have a meeting booked with a hedge fund during your stay, management should ‘expect focused questions, often directed at the key issues and challenges facing their company or industry and catalysts for stock price movement,’ says Case. 

‘It’s important to note that while hedge funds generally have higher turnover and shorter holding periods than actively managed firms, some hedge funds also use longer-term strategies in some portfolios. And for small-cap companies, hedge funds can play an important role in creating oft-needed liquidity.’

Planning a trip

As with most cities outside the main investment centers, companies shouldn’t need more than one day in Chicago, featuring a group meeting plus a series of one-on-ones. According to Case, a Chicago resident, the city is pretty easy to navigate, especially compared with New York and Boston. 

‘Most investment firms are located in or nearby downtown Chicago and there are also some great firms in the suburbs that will come into the city for a group meeting, which are a great way to cover both existing and prospective investors in one day.’ 

As a tip on making the most of a trip to Chicago, Case says it can be worthwhile stopping off to see investors based in the suburbs while traveling in or out.

‘If an institutional investor is a really good match for your company, and depending on what suburb it is located in, it’s possible to stop by on your way to O’Hare International Airport to meet with it or arrange a one-on-one at one of the many nearby hotels,’ she says.

Given the mix of hedge funds and value investors in Chicago, meetings can focus on a range of topics and timeframes. The latter group will allow management teams and IROs to get into the longer-term conversations they tend to enjoy. 

‘Reflecting the Midwest culture, meetings with investors in Chicago can be a bit more relaxed than in New York or Boston, as Chicago-area investors tend to take a low-key and friendly approach to meeting with companies,’ notes Case. 

‘Although Chicago is one of the top five cities in the US for non-deal roadshows, it is not as big as New York or as active as Boston. Investors appreciate the efforts of teams that take time to visit. Some companies like going to Chicago to ‘warm up’ ahead of visiting New York and Boston.’

Sleeping, eating and meeting

Wondering where to stay while in town? Case recommends the Four Seasons, the Ritz-Carlton and the Loews as ‘centrally located and high-end hotels’, along with boutique option Kimpton Gray. ‘These hotels provide quick access to investors and are nice places to hold breakfast meetings,’ she says.

Turning to food, Chicago offers something for all tastes. There are the classic spins on American food, such as deep dish pizza, Italian beef (a sandwich with thin slices of beef served in gravy) and the Chicago-style hotdog. During roadshows, however, fine dining may be more appropriate, in which case Chicago has you covered. 

‘Chicago is now home to many fine dining restaurants as well as great casual dining,’ says Case, who suggests the following options:
* Beatrix (American)
* Pacific Standard Time (New American)
* Leña Brava (Mexican tapas)
* Monteverde Restaurant & Pastificio (Italian – especially known for its pasta)
* Ema (Small plates) 
* Chicago Cut (Steak) 
* Maple & Ash (Steak) 

Free time is a rare commodity while out on the road. But for those who can fit it in, a great way to pass an hour or two is to take a boat tour on the Chicago River, which is the best way to see the city’s stunning and varied architecture. 

Follow these links to read roadshow guides to Baltimore and Denver.