When it comes to effective investor communication, IROs are expected to have a thorough understanding of the investors to ensure communications with these parties are aligned.
To help prepare IRO for this task, we discuss some elements of finding out what investors are most interested in when speaking with companies.
Know the Fund Characteristics.
Before we dive into the main issues, it is imperative that IROs have information on the basics of the equity fund. Knowing the number of stocks held in the portfolio, market capitalization, liquidity goals, and the fund’s sector and region allocation range would serve you well in figuring out the right angle to pitch your company story. The fund managers’ current fund composition sheds light on their preferences and gives a sneak peek into how likely you will stay on their radar after the initial meeting.
Investment Process.
Each fund house’s methodology varies, and we cover some common approaches in this post. It usually starts with opportunity screening within the pre-defined investment universe to seek out businesses that exhibit favorable attributes. Many look for market position, growing markets, innovation power, and a strong balance sheet. The criteria could be complicated, with numerous specifications, or relatively simple. And in short, they want to know whether this is a profitable business that can continue to generate returns.
Afterward, it’s a rigorous phase of in-house research that focuses on deciding if the company can pass a closer look at its fundamentals. Detailed analysis and modeling of the company’s financials is a prerequisite. Still, most importantly, they are prone to identify your strategic advantages and seek out red flags that they should be aware of. Investors want to ensure that the company has a strong brand name and product pipeline and is maximizing its advantages to increase market share, and is well-positioned in a market with obstacles that prevent new competitors from entering easily. At the same time, investors want to steer clear of investment opportunities that involve equity ownership or customer concentration, sole source supplier, and accounting irregularities.
Bringing in institutional investors is unquestionably an elaborate task that calls for patience. Making it to the approved list is not enough; the company’s fundamentals must withstand many rounds of internal debate and survive different scenario assumptions to convince investors that you are most likely to outperform peers. At long last, the construction of the portfolio commenced, and investment styles, sub-themes, and risk level diversified stock selections.
With an investor engagement strategy designed by ICA, you can effectively present your financials and developments and provide easy access to critical information for investors.
