Management’s Influence on Investor Decision Making
Everyone knows that a strong management team is essential in business, but we wanted to know exactly how that can influence investor decision making. We surveyed hundreds of buy side professionals representing a variety of roles ranging from Analysts to Portfolio Managers to CIOs from major cities across North America to understand how they perceive management’s influence on their decision to invest. We asked how important it is for investors to meet the management team, and whether it should be IROs or management who reach out initially.
How Important is it for Investors to Meet Management?
When we asked respondents how important it is to meet management as part of the investment decision making process, the answers were unanimous. Across the board it is clear just how important it is to speak directly with the issuers’ management team.
Everyone surveyed agreed that meeting management is at least somewhat important (10.5%), with 21% identifying it as important and 68.5% identifying it as very important. So why does it matter? Even if it’s only slightly important, that extra interaction and level of understanding could be the difference between acquiring a new investor or not. Below we’ve shared some feedback to help understand the views of the buy-side on this matter:
“Having faith in management execution, and a clear understanding of a company's strategy is key to any investment for us. A management meeting builds trust for investors and creates an opportunity to gain a deeper understanding of strategies that cannot be obtained without direct dialogue.”
Another respondent echoed the sentiment:
“When you are investing in a company, you are (effectively) investing in the management team, so meeting management gives me the opportunity to learn a lot from topics management embraces or avoids.”
One of the major themes shared by all respondents is the importance of understanding the business on a deeper level than just their financials. When you give investors the opportunity to meet management, it allows them to access an additional layer of what the company is about and who the key decision-makers of the company are. So when you schedule your next roadshow or investor meeting, be sure to include a member of your management team or someone who has unique operating experience in the company.
IR vs. Management - Who Should be Reaching Out?
Not only is management important for the image of your company in the minds of investors, they also play a major role in conducting effective outreach with investors. The majority of respondents said that they are more likely to take a meeting with an issuer if a member of the management team contacted them directly as opposed to a member of internal IR.
When surveyed, 64% of respondents indicated that they would prefer management to initiate outreach, while only 10.5% of respondents would prefer an IRO and 25.5% had no preference between the two. Here is what one respondent had to say on the matter:
“I’m more likely to respond to a member of the management team reaching out than internal IR. In regards to internal IR, their job is to get as many meetings as possible. When management reaches out to me directly, there is presumably more thought involved.”
Now this doesn’t mean that IR shouldn’t be conducting investor outreach; on the contrary, it means that IROs have room to step up their game. Afterall, part of management’s role is to appropriately delegate work. We’ve previously discussed the top strategies for conducting investor outreach and preparing compelling investor pitch materials and encourage all IROs to take a look.
Despite the majority of buy-side survey respondents indicating that they prefer management to reach out directly, that doesn’t mean that IR can’t help. IR professionals are meant to conduct investor outreach, and should always collaborate with management teams when they are reaching out to investors. Management’s role here is to direct and advise IR to take the lead, and to join the conversation at the appropriate time. As an IRO, it's your responsibility to vet which investors should get an introduction to the C-Suite and to manage the ongoing relationship.
Management’s role in investor relations is invaluable. When possible, it’s beneficial to include management even during the early outreach stages. That being said, it’s not always possible to get your CEO on every call, therefore it’s up to IROs to take the lead and incorporate management on an as-needed basis to maximize everyone’s time.
For more insights into the buy-side, download our free Views from the Buy Side e-book.