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Tue, 12/09/2014

MSLGROUP Publishes Inaugural Global Institutional Investors Insight Report

MSLGROUP Publishes Inaugural Global Institutional Investors Insight Report

London, 9 th December 2014 — The global Financial Practice of MSLGROUP, the strategic communications and engagement company of Publicis Groupe, today released the results of its inaugural Global Institutional Investors Insight survey covering the North American, European and Asian markets. The study offers insights into how institutional shareholders and sell-side analysts view public companies within the overall context of their global portfolios and how their approaches have evolved in the wake of the financial crisis. 500 institutional investors and sell-side research analysts globally participated in the survey.

Commenting on the research, MSLGROUP Global Financial Practice leader and CNC Partner, Roland Klein, said: “Our survey findings highlight key market distinctions among investors.  As just one example, investors in Europe now place more importance on the degree to which director compensation aligns with corporate performance when compared to their U.S. counterparts—62% in Europe versus 42% in the U.S.  Taken together with other findings in the report, it is becoming increasingly clear that while institutional investors around the world share certain characteristics and approaches, a one-size fits all approach to investor engagement is not optimal, as cultural and behavioural differences are becoming more transparent.  And although many companies are seen to have improved their investor communications practices in recent years, the diverse and increasing demands of a global audience mean more needs to be done to maintain and cultivate a supportive shareholder base.”

On a global basis, the study documented four factors that have become more prominent for investors when evaluating whether to invest in a company post the financial crisis.  These qualities include:

  • Good track record in meeting earnings expectations (65% of investors).
  • An equity story that is clearly defined (58% of investors).
  • A demonstrable link between the compensation of directors and company performance (54% of investors).
  • High quality investor relations team (51% of respondents).
  • Lastly, sell-side analysts agree with the top four factors identified by investors at slightly higher rates—outside of director compensation—but also stress the importance of management one-on-one meetings, according to 57% of sell-side respondents.

Among the findings, the survey also shows that “extra-financials,” those often intangible factors not reflected in a company’s financial statements, are becoming more important to driving valuation today.  The top three extra-financial factors taken into account by institutional investors surveyed are corporate strategy (95% say it is important), quality of executive management (95%), and transparency of investor disclosures (91%).  Notably, the media image of a company was rated important by 66% of investors, and a digital and social media presence was cited by 52%, suggesting that corporations can influence institutional investor perceptions directly through these platforms.

All of the extra-financial factors highlighted in the full report speak to the importance investors place on the qualitative elements of a company’s equity story.  Accordingly, the strategic value of appropriate messaging around these elements should not be underestimated.  Given the increasing globalization of the capital markets, regional interpretations of what are the most important corporate extra-financial factors seem to be deepening across the investor markets in North America, Europe and Asia.

Glenn Osaki, President of MSLGROUP Asia, said, “Our inaugural survey and report highlights the role of both financial and cultural factors in the decision-making process of institutional investors, underscoring the value of a multinational approach to investor relations.  For example, environmental, social and governance factors are seen as a key factor driving a company’s valuation by 85% of investors in Asia compared to 64% in the U.S.  As corporate shareholder bases become more global in nature, it will be essential for CFOs and investor relations officers to more fully understand such cultural differences as they seek to attract investment across diverse geographic markets.”

Additional Highlights of the study include:

  • Shareholder activism is expected to become increasingly prevalent and more global…

More than three-quarters (77%) of the investors surveyed believe that activism levels will increase in the coming three years and become more prevalent worldwide—a view most strongly held by U.S. investors.

  • Investors located in Asia offer some unique perspectives…

Investors in Asia place a significantly higher importance on a number of important factors including sufficient sell-side coverage (62% versus 33% globally), management visibility at sell-side events (56% versus 39% globally), a dedicated investor relations function (67% versus 51% globally), management one-on-ones (61% versus 45% globally) and a digital footprint (54% versus 39% globally).

In addition, when it comes to extra-financial factors, these regional differences continue to be displayed:  77% of investors in Asia note that a digital and social media presence is important to driving a company’s valuation, compared to 40% for European investors and 49% for U.S. investors.  At the same time, media image was viewed as important by 86% of investors in Asia, compared to 54% for European investors and 66% for U.S. investors.

  • Investor portfolio characteristics vary by region…

Portfolio concentration and turnover rates vary significantly across U.S., European and Asian markets—ranging from 20 individual stocks to multiple hundreds per investor.  The findings highlight that investor portfolios in Europe tend to be the least concentrated, with up to twice the number of stocks held than their counterparts in the U.S. and Asia.  U.S. investors appear the most loyal, with 63% of investors there holding more than three-quarters of the same stocks today that they had in 2013.  This compares with less than 10% for Asia.  Over a five year holding period, 30% of U.S. investors had retained over half of their portfolio holdings, versus 26% in Europe and 1% in Asia.

To download a free copy of the report, please click here .  And to download the accompanying infographic, please click here .

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