Global investors look to corporates to facilitate meetings directly as they cut back on sell side

Global investors look to corporates to facilitate meetings directly, as they cut back on sell side corporate access following MiFID II implementation.

 

London, 9 January 2018 – Investors anticipate significant changes to the way meetings with company management are facilitated under MiFID II regulations, which have now come into effect. Research by QuantiFire, in partnership with the Investor Relations Society (IR Society) the UK’s professional body for investor communications, found that over half (52%) of investors polled say that they will now use sell-side corporate access services ‘less’ or ‘much less’, while 54% expect to be ‘more’ or ‘much more’ reliant on direct engagement with companies. At the same time, only 25% of investors expect to have fewer meetings with company management in 2018.

The research, conducted in December 2017, sought to establish investors’ views on the impact of MiFID II on their meetings with companies. 302 institutional investors responded to the survey, including 10 of the top 20 largest global investment institutions, making this the most extensive study on the subject to date. Key findings include:

• 92% of investors view corporate access as important or critical to their investment process
• 90% of investors regularly used sell-side corporate access teams last year, while 52% are now less likely to continue doing so
• However, only 25% of investors expect to have fewer meetings with company management this year, while 13% expect to have more meetings
• 54% of investors will be more reliant on companies contacting them directly in 2018, with only 33% planning to use internal resources to manage corporate access

A number of investors also state that they expect companies to be more proactive in arranging meetings, either directly or through independent intermediaries. This is particularly relevant for non-deal roadshows, which 59% of investors see as the preferred way to meet company management (by comparison, only 16% prefer to meet at conferences).

Half of all institutional investors (51%) also do not intend to make any payments for corporate access in the future, with the implied burden falling on companies’ investor relations departments. Among those who remain willing to pay for sell-side corporate access, it is also clear that unbundled payments will bring the same additional scrutiny to the cost and quality of meetings as they do to analyst research.

Commenting on the research, Charles Hamlyn, Managing Director of QuantiFire said: “Much attention has been paid to the implications for research distribution under MiFID II. However, from an Investor Relations perspective, the impact on corporate access is likely to be equal or even greater. Given the need for investors to demonstrate compliance with the regulations, as well as the pressure on margins for fund management, it is no surprise that so many investors are now looking to corporates to maintain proactive interaction”.

John Gollifer, General Manager of the IR Society commented: “This timely survey suggests that the responsibility for investor engagement is shifting inexorably to the companies themselves. The changes wrought by increasingly regulated public capital markets mean that we will see a need for, if not an onus on, company management to ensure that its investor communications are properly resourced and ready to fill any gaps that appear in the investment process of investors. I have no doubts that listed companies themselves, through their investor relations teams, will have to be proactive, step up and be the vital link between their business and their investors.”