Ch..ch..ch..ch..changes – the rapidly evolving world of fund management
There are few, if any, financial sectors which have escaped the recent maelstrom in the markets and the Fund Management Industry is no exception.
The pace of consolidation, which has been going on for some time now, has if anything quickened and has recently been capped by the bringing together of Blackrock with BGI to create a £1.75 trillion funds under management giant.
Other managers have been less fortunate; New Star experienced a debt-related demise and now resides within Henderson. Nicola Horlick’s Bramdean has met an unceremonious end while others, like Insight and Scottish Widows face an uncertain future as they now find themselves owned by the Lloyds/HBOS combination and it is most unlikely both will survive. With markets at low levels and with an absence of money inflows (the cash outflows have probably stopped now) and with a surplus of talent around, revenue maximization (agglomerate) and cost management (sack people) are the rules of the game.
This is likely to lead to some further consolidation on share registers of course as well as the disappearance of some familiar faces and the reappearance of others elsewhere, possibly in a similar role, but possibly not.
This whole whirlwind of upheaval creates an issue (and opportunity) for companies in terms of a break in the continuity of any relationship they may have had with a specific house or fund manager.
It means a very active approach is required to ensure that listed organisations are getting in front of the right people as soon as possible. For smaller, less liquid stocks, material changes in key fund management personnel could destabilize things enough to have an impact on the share price.
Of course, being active with institutions is always to be recommended but as if the rapid changes in personnel aren’t enough to contend with, there is another trend developing which is set to make any company’s task yet more complex – the changing nature of funds themselves.
It has always been difficult to work out the pecking order of seniority facing you at institutional meetings. Is it the analysts or the fund managers you should be focusing on? Who actually holds the stock?
It was bad enough when you were pretty certain that the people there were long-only investors. Now however, the boundaries are likely to get increasingly blurred. Following the crisis in credit markets, the role of debt has become an increasing point of focus and companies may now be faced by a team comprising traditional long-only fund managers, someone from the hedge desk and someone from the fixed interest desk. How do you tailor your presentation for that? Are you going to know who does what? Are they going to tell you what their position in the stock is?
All of a sudden one man’s meat is another man’s poison.
There is no easy solution to this ahead of time, but obtaining good quality feedback from investors is one very good way of tackling the issue of understanding their overall concerns and positioning in detail. This can either be done following any roadshow or as a stand-alone exercise away from the traditional reporting periods. Because most institutions are loath to give brokers any information about their holdings it is either better to contact the institution directly or use a trusted independent such as IR Focus, working on your behalf, to obtain the information.
Whether it concerns messaging, targeting, feedback or governance, the management of the PLC/institutional interface is becoming ever more important and complex. Boundaries are blurring and faces are changing in a process that looks set to continue.
Ignore it at your (share price’s) peril.
