North American investors say they need more and better access to non-North American companies to gain greater confidence or initiate a position in international firms, according to a study released by BNY Mellon.
The survey, Insights into North American Investors’ Views of Corporate Access, was conducted by Ipreo, an independent IR market intelligence and analytics firm, and BNY Mellon in spring of 2014. It examined how the North American investment community perceives its current access to companies outside the US and Canada. Forty investment firms with more than USD3.1 trillion in combined equity assets under management took part in the study, with an average portfolio allocation to non-North American equities of 31.5 per cent.
North America’s asset management community has been resurgent. Market prices and assets under management have recovered from post-crisis lows and more firms have entered the marketplace. In the US and Canada, USD516 billion of non-North American holdings are now held in the form of depositary receipts, a 45 per cent jump since 2008. In addition, from 2012 to 2014 total equity value invested outside of North America grew by more than 30 per cent.
“Asset growth and greater focus on diversification has placed new strains on the management teams of non-US companies as they try to meet the demands of North American investors,” says Christopher M. Kearns, CEO of BNY Mellon’s Depositary Receipts business. “To meet these demands, issuers worldwide need to refine their targeting and balance how they serve existing shareholders with the most effective ways to engage new investors. Providing sufficient corporate access is a crucial gateway.”
The survey found that 43 per cent of investors rate their current level of corporate access to non-North American companies as average or poor, driven by dissatisfied investors in secondary investment cities.
Some 60 per cent of respondents state that lack of corporate access eliminates a non-North American company from their investment universe.
Regardless of satisfaction with their current access, over three-quarters of respondents say they face limitations in obtaining access to non-North American firms, especially for investors based outside of primary investment cities.
A quarter (26 per cent) of investors have reduced the number of meetings arranged by the brokerage community. For those with greater than USD50 billion in EAUM, half of their meetings with non-North American companies are organised independent of the sell side.
Before initiating a position in a non-US company, 72 per cent of responding investors require at least one meeting with senior management to establish confidence in the team and better understand the firm’s story and strategy. Once invested, respondents say they require one meeting per year (though they prefer two) to keep up-to-date on operations.
“There are more than 1,200 active asset management firms in the US and Canada investing globally that weren’t on the radar 10 years ago,” says Guy Gresham, head of the global IR advisory team in BNY Mellon’s DR group. “This new research sheds light on the views of international equity managers of all sizes, identifying where they simply are not getting adequate access to international companies. Our goal is to help improve understanding and connectivity between issuers and investors that can benefit both sides.”