Companies globally have increased their dialogue with hedge funds and sovereign wealth funds over the past year in an effort to continue broadening their investor target lists, finds a new survey.
Further, almost a quarter (22%) are considering a secondary listing in a high-growth market to improve investor access, with 70% of these citing a listing in mainland China or Hong Kong as of strategic interest.
The annual survey by BNY Mellon, Global Trends in Investor Relations, examines how publicly traded companies are managing their investor relations (IR) practices, from guidance and disclosure policies to sell-side approaches and growing interest in social media.
In all, 400 firms of varying capitalisations across 47 countries were consulted. Financials represented the largest grouping at 84 respondents, followed by technology at 56 and industrials at 51. In geographic spread, 26% were from North America and 26% from Asia, Western Europe accounted for 21%, Eastern Europe, the Middle East and Africa for 15% and Latin America for 12%.
An overwhelming 93% of the firms reported that they now meet hedge funds, versus 89% in 2009. They note that 24% of their investor meetings are with hedge funds, up from 16% previously.
Meanwhile, 47% of all companies meet sovereign wealth funds (SWFs), with an additional 23% saying they are considering meeting them.
“This is about corporates broadening their investor target lists,” says Gregory Roath, head of Asia-Pacific for BNY Mellon’s Depositary Receipts business. “That includes hedge funds and sovereign wealth funds (SWFs), and they are recognising the importance of those investment flows to the market.
“Hedge funds can be long-term investors and are generally quite important in terms of providing liquidity to a company’s equity. They can also be a very good source of information on a particular sector with respect to what the market might be seeing vis-à-vis one’s equity.
“Understanding who your investors are is the bottom line here and certainly the job of the investor relations officer.”
Despite the evident interest in Asian investors from a secondary listing perspective, respondents say that North America (77%) and Europe (70%) will continue to be the major regions of focus in terms of the growth of investor opportunities over the next three years, with Asia trailing in third (48%).
“Traditional markets, if you can term North America and Europe as such, are and will continue to be of importance due to the depth of capital available and the importance of raising capital,” notes Roath.
“But if we group Hong Kong and China together as Greater China, companies see that market in particular as attractive for strategic reasons and business ties. It is about building visibility with consumers in the region and ultimately demonstrating commitment to those markets, as well as positioning the company in a growing market. That is how the two fit together.”
Interestingly, Western European companies were found to be the most likely to meet or to consider meeting SWFs, at 56% and 44%, respectively. But North American firms were the least likely to engage SWFs, with more than half stating they had no plans to meet them.
Roath says the survey did not explore the rationale behind this finding, but that it would be considered for future reports.
The survey also finds that social responsibility reporting is most common in Western Europe (77%) and Latin America (72%), in contrast to just 36% in Asia-Pacific and a lowly 29% in North America.
Meanwhile, just 9% of companies use social media to communicate with investors, although 35% are looking for more information on its potential uses. Of those that do use social media, Twitter is the preferred medium, followed by corporate blogs.