MiFID II ratchets up pressure on investor relations teams as investors go direct
Regulatory change has put the investor relations teams of UK companies’ under increasing pressure as demands from investors soar, according to the latest research from Orient Capital, the investor relations specialist and part of Link Group.
The implementation of MiFID II in January last year increased the range of responsibilities IR teams must take on as support they receive from brokers has reduced, and investors engage with issuers directly. This is placing IR teams under strain. In a survey of IR professionals from the UK’s 350 largest companies, 44 per cent see the limited resource available to them as their primary concern, up from just 14 per cent in 2017.
The squeeze on resources was felt more acutely among companies in the 250, who typically have smaller budgets and IR teams. 50 per cent of IR professionals for mid-cap companies cited resource as a key concern, compared to 39 per cent in the top 100.
Greater direct interaction with investors, and a more proactive approach to arranging investor roadshows has placed IROs under greater pressure. Some 32 per cent of IROs identify the increase in direct meeting requests from investors as a key challenge. Indeed, Orient Capital’s analysis shows that average IR teams held 24 per cent more meetings with investors last year than the previous year. The typical company in the UK 350 now conducts 328 investor meetings per year – up from 265 meetings in 2017.
The increased burden on IR teams has led to larger budgets. Half of all IROs have seen their budget increase since MiFID II. This is slightly more prevalent among the FTSE 100 (53 per cent) than the 250 (47 per cent). Meanwhile, 26 per cent of companies have increased headcount within the IR this year. Nonetheless, rising concerns over resource suggest bigger budgets have proved insufficient to cope with demand.
As IR teams’ workloads increase, and they take a more proactive approach with investors, it is important that available resources are used strategically and efficiently. Investor targeting, based on detailed insight of investors, is central to this. Many companies, however, are unsatisfied with the quality of the targeting reports they receive. 38 per cent of respondents would like more information on existing investors to shape their engagement. Worryingly, only 12 per cent of issuers understood their investors’ target price in relation to their stock.
Alison Owers, EMEA CEO of Orient Capital, says: “Seismic regulatory changes have shifted the ground beneath investment relations teams. They are under greater pressure as disintermediation takes place, and investors increasingly seek to engage directly. At the same time, sell-side research coverage has reduced, creating a need for IR professionals to take a more proactive approach. This is creating a perfect storm when it comes to demands on time and resource.”
“As investor relations teams adapt to the new world, it is more important than ever that they use their available resource as strategically as possible. This means having the right analysis, targeting and support to prioritise and plan meetings, and focus their communications effectively. They cannot afford to fly blind.”