US — More than 40% of CFOs plan to increase their focus on investor relations (IR) next year on the back of demands from institutional investors for more face time with company management teams, a Greenwich Associates study has found.
Bill Bruno, Greenwich Associates consultant, said institutions were increasingly bypassing Wall Street analysts and going directly to the source when evaluating potential investments and monitoring the performance of portfolio companies.
“As part of this process, institutions are seeking out more frequent one-on-one meetings with top corporate officials - especially the CFO - as an intrinsic and integral part of investor relations," said Bruno. "It is in response to these demands that CFOs are upping the proportion of their time spent on investor relations.”
According to Greenwich Associates’ 2006 US equity investors study, of the US$4.5bn in commissions paid out by institutional investors for equity brokerage research/sales coverage and related service from 2005 to 2006, institutions directed roughly 20% to compensate brokers for setting up meetings with company management teams.
Of the largest institutions and most active institutional investors, payments to brokers that facilitated direct access to company management made up nearly 30% of total research commission payments, the research showed.
Yet despite Wall Street’s diminished role in the institutional equity research and investment process, Greenwich Associates recommended that CFOs "think twice" before making any significant reductions to the amount of time or attention paid to sell side analysts.
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