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IROs missed a great opportunity to hear direct from three senior fund managers how they view their relationships with IROs at Tuesday’s lunch time meeting kindly hosted by College Hill, however 35 other members benefited from the event. The meeting was chaired by Gary Leibowitz, Senior Vice President, Investor Relations at SAB Miller with speakers from Barings (Alexandra Hiller), Carlson Capital (Neal Smith), and Occitan Capital Partners (Jennifer Byron).
The fund managers were very complementary about IROs. The consensus view was that that the role of IR has changed immensely and the quality and seniority of those involved in IR has improved. 10 or 15 years ago fund managers didn’t ever have a meeting with IROs on their own but now, in many cases, they are a credible alternative to senior management and definitely key to the relationship with the buy side. The best IROs are the ones that have had some experience at a divisional level within the organisation and are perceived as being close to the centre of decision making. The key to IR is to have credibility. It is very frustrating when IROs are circulated through the function and change just when they have established links with investors.
The fund managers said that because IR had become better over the years and there was a more continuous dialogue with companies, they were now less reliant on the formal updates during the year as there were less likely to be surprises. They like to talk about fundamental market dynamics, competitive positioning and medium to long term strategy with a 5 – 10 year horizon. The sell side are too interested in the short term.
The Annual Report is still regarded as important but again because of the improved relationship with companies with good IR it is unlikely that there would be things to ‘discover’ when the AR is printed. The on-line pdf version of the financial statements is the most important part of the accounts with the notes to the accounts and the remuneration report providing the most valuable extra detail. The general view was that there is far too much ‘stuff’ at the beginning of the AR.
On governance and CSR reporting, the feeling was that materiality is key. If it impacts the ability to generate investment alpha then it matters. If there is a problem with governance it is a big black mark against investing. Social responsibility is still probably not a mainstream issue unless you are running a specialist fund.
The fund managers unanimously agreed that they prefer to have a direct relationship with companies. On consensus forecasts, the feeling was that the ‘sell side consensus’ was sometimes very different from the buy side expectations and less relevant for long only fund managers, however there may be short term speculation around a change of consensus.
Transparency Matters was also in attendance at the meeting:
"Time spent in reconnaissance, as Clausewitz said, is never wasted.
And the IR Society’s lunchtime event, during which Gary Liebowitz of SAB Miller questioned three top fund managers was a classic example of time well spent..."
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Published: 9 November, 2011