Targeting expert and IRO discuss finding active managers, looking beyond peer comparisons and identifying fund decision-makers
With the rise of passive investing and the growth of exchange-traded funds (ETFs) and algorithmic trading, the addressable market of active investors continues to shrink, so a more sophisticated approach to ownership identification and targeting is a high priority for IROs.
That was the backdrop to the recent IR Magazine Webinar – Using intelligence to drive decision-making, co-sponsored by Nasdaq and available on the IR Magazine website here.
On the webinar, seasoned veterans discussed howto discover new potential shareholders. Presenters James Tickner, senior director of corporate solutions product development at Nasdaq, and Charles Triano, senior vice president of IR at Pfizer, shared their thoughts on how to navigate this complex landscape.
With ETF assets under management already above $3 tn, ETFs now surpass hedge fund assets and identifying which shareholders are active managers is more necessary than ever. Tickner pointed out that generalist active investors manage eight times as many assets as sector funds, so identifying potential generalist investors that are right for your stock is the name of the game.
By looking at peers beyond an industry category to include companies with similar financial characteristics such as cash flow, profit margins or capital structure, the IRO can uncover opportunities with generalist portfolio managers not on his or her radar, Tickner advised. In addition, looking at intangibles such as brand strength or sustainability and governance scores can identify potential new investors looking for those attributes.
Find the decision-maker
In addition to broadening the view across institutions, IROs can use market intelligence to gain a deeper understanding of decision-making within a given institution. Knowing who the other team members are, how many funds a particular manager may influence and who the decision-makers are helps IROs know who else they should be talking to at an institution. ‘Trying to assign a single dollar value [for investing] to any one person is fraught with complications,’ Tickner added.
Triano also advised IROs to leverage relationships with the sell side, and institutional sales reps in particular, to gain that deeper insight within a firm.
In addition, deeper ownership intelligence can inform corporate strategic moves by anticipating how current and potential shareholders may react to actions such as an M&A transaction or change in capital structure. This insight not only helps the IRO to set senior management’s expectations about investor reaction but also elevates IR into the heart of corporate strategic decision-making.
Understanding how investors may react to an announcement goes beyond setting management expectations, Triano explained. He uses that insight to drive the emphasis around what gets communicated about a move. For example, if you identify a threshold of growth that is a tipping point for investors, make a statement or projection in press releases and conference call materials announcing the change, he advised. ‘If you’re vague or non-committal, you’ll get what you deserve.’
