Examine the effects on the Canadian IR community in the wake of Mifid II.
Manulife IRO feels the Mifid II effect in Europe
Shareholder targeting takeaways from IR Magazine’s recent think tank in Toronto
The effects of Mifid II have so far been muted in Canada, but speakers at the recent IR Magazine Think Tank – Canada indicated that this could be changing, particularly when it comes to targeting in Europe.
Adrienne O’Neill, global head of investor relations at Manulife, explained that the company has been undertaking efforts to diversify its investor base in Europe and Asia for several years. As a result, she has noticed a difference in how investment banks in Europe are able to support Manulife’s targeting and engagement efforts.
‘We were recently marketing in Frankfurt. I looked at the list of investors we were meeting with and noticed that our largest investor wasn’t on the schedule. When I asked the bank about this, it said it didn’t have a relationship with [the investor],’ O’Neill told attendees at IR Magazine’s event.
She added that the banks she works with in Europe are now actively encouraging her to share a target list so they can tell her the meetings they can and can’t schedule, enabling her to then reach out directly to investors and targets if needed. This is consistent with the collaborative approach outlined at the recent IR Magazine Think Tank in Palo Alto.
O’Neill explained that she now ranks her targets in tiers of importance – from platinum to gold, silver and bronze – to help the banks she partners with better understand her priorities.
These comments were echoed by Jenni Piette, head of investor relations at GT Gold Corp. ‘We’re all being asked to work harder,’ she said. When building out her IR calendar, Piette said she focuses on the conferences she knows she wants to have a presence at, and then looks for opportunities to build in extra meetings or mini-roadshows in the same location.
‘I do a lot of conference research, so I can make sure I know who is attending and who I will be meeting with,’ Piette said. ‘I can say no to conferences, or I can add my own additional meetings around them.’
O’Neill added that Manulife’s investors are increasingly open to being targeted in new ways. One example she cited is investors’ openness to virtual meetings, which they see as an improvement on phone calls. Earlier this year at IR Magazine’s forum in Toronto, both the TMX Group and OTC Markets discussed how the tide is turning on virtual meetings.
O’Neill also explained that investors in Europe – ‘the really big names’ – are now more open to IR-only meetings, based on her experience of marketing there.
Brian Smith, who recently joined Rose & Co as a managing director after spending almost 30 years on the sell side at Barclays and RBC Capital Management, said IR-only meetings can increasingly be effective ways to explore new roadshow destinations without the risk of taking a CEO or CFO along for the trip.
‘There’s definitely a place for [IR-only meetings],’ he said. ‘Especially if you’ve targeted a secondary market, they can be very helpful.’
The panel agreed that increasingly IR teams are expected to be subject-matter experts, not just on their company’s story and financials but also on their competitors, their industry and – sometimes – relevant political or regulatory issues.
Mifid II begins to bite in Canada
European regulation was the main talking point at last month’s IR Magazine Forum in Toronto
Canadian issuers are beginning to notice the impact of Mifid II on their marketing calendars, sell-side coverage and quality of conferences, according to the panelists at last month’s IR Magazine Forum in Toronto.
While Mifid II has long been a talking point at IR Magazine events, the Canadian community has been less spooked than its counterparts in the US and Europe until now, due to a range of factors including the tight-knit nature of the Canadian investment community and concerns closer to home about US-Canadian trade.
Simon Rose, CEO and founder of Rose & Co, explained that as the investment community in the US moves closer to a European model, that will affect coverage of Canadian stocks. ‘US banks have dedicated sales teams that sell Canadian stocks. Most of those banks are down to zero, one or two salespeople among the bulge bracket firms,’ he said.
It’s not just the volume of coverage that is declining, Rose added: the quality of the conferences and non-deal roadshows being organized is also falling. ‘There’s enormous redundancy of the same people from the same accounts seeing the same people,’ he said. ‘The level of discontent coming from IR and the C-suite is becoming fiercer.’
Rose explained that this puts more pressure on investor relations professionals to set up meetings themselves. ‘Whereas before it was incumbent on Wall Street to create
connectivity between the investor and the company, now the IR team has to do it,’ he said.
He cited statistics from IR Magazine’s IR Resources report, which shows that IR budgets globally fell by $1,000 between 2016 and 2018, while team sizes in North America fell from 2.8 people to 2.2 people.
Malcolm White, portfolio manager at CI Investments, noted that the same change is occurring on the buy side, referencing Norges Bank Investment Management’s decision not to pay for non-deal roadshows and build out its corporate access team.
‘Other firms are considering this type of strategy,’ White said. ‘For us, we’re looking at shared services. We’re a collection of multiple managers and we look for ways to consolidate resources. Corporate access is one idea.’
He added that there is now more pressure on him as a portfolio manager to make up for some of the information he typically would have received from sell-side research: ‘As traditional IR channels decline, we need to fill in those voids. We’re looking at artificial intelligence and machine-learning data, sentiment analysis, satellite imagery and then services that bundle traditional sell-side research together.’
Several panelists talked about how technology can assist IR teams with the job of marketing and amplifying their company story, amid the Mifid II disruption. Taylor Thoen, CEO and executive producer of BTV, talked about the power of recording video interviews or scripted videos with company executives around key events and earnings announcements. By focusing on the message you want to convey in a short, sharp video, you also focus your mind on the story you want to tell more broadly, she said.
Similarly, representatives from the TMX Group and OTC Markets talked about how they were investing in videoconferencing facilities to assist their listed companies with setting up virtual investor meetings.
White explained that the buy side is softening on the use of videoconferencing for meetings with issuers. ‘A few years ago, I’d hear other portfolio managers saying they wouldn’t want video meetings,’ he said. ‘Now with the decline in non-deal roadshows, portfolio managers are saying, I’ll take anything. What’s really important to me is not that they’re here, but that I have a chance to hear them answer my questions.’
