Issuers at Industry Conferences

In prior posts, we have gone over what happens at industry conferences.  The process of allocating meetings to investors such as mutual funds, hedge funds, pension plans, etc. was reviewed.  There is another client at the meeting - the corporate representative.  This can be a high level manager at the company such as the CEO, Chairman, President or CFO or the Vice President of Investor Relations.  The investment bank asks the buy side who they want to meet.  During the scheduling portion of the conference set-up, this list is previewed by the corporate.  At this time, the corporate may edit the list.  This could be as follows:

1. I want to see these 3 investors because they are long term holders of my company
2. I do not want to see this investor because they are traders of my stock
3. I need to see this investor because they hold 5% of my company

The corporate access team at the investment banks are always balancing the needs of the buy side with the needs of the corporates.  They have to handle 2 different sets of customers.

Updated Concepts in Choosing Investment Managers

One of the more interesting presentations at the Manager Selection Conference at NYSSA mentioned in the previous post was regarding selecting the right investment managers for your portfolio.  I am only the messenger here.  The following is list of ideas from the brain of Thomas Latta, Managing Director and CFA.

The financial crisis of 2008/2009 brought an end to the concept that "beating the market" was good enough for investors. If the benchmark is down 50%, is it good news that a manager is only down 45%? This provided a wake-up call to traditional money managers. The challenge is to fix this error but not commit the old error of timing the market.

This can be done by having improved risk management processes, qualitative analysis of managers and building a portfolio from a mix of different strategies. Better risk management involves managers having strict selling criteria, diversification, tail risk management and close monitoring of active risks. When managers are rated, there is a premium on experience, diversity amongst the managers (in terms of training and process experience) and knowledge of behavioral finance i.e. the science of crowds. The portfolio should hold two main strategies: style-based and flexible. However, this increases the need to monitor at a total portfolio level.

The trend for the advisor is to choose funds with concentrated portfolios of 20-30 positions in either traditional or alternative asset funds. This allows the advisor to choose managers with more freedom in investment decisions, that can manage their Beta and have lower correlation with the market.

Another Type of Conference

I had the pleasure of attending a conference that was not sponsored by an investment bank. It was held by one of the CFA (Chartered Financial Analyst) Institute societies and was decidedly more low key. The accommodations were not at a posh hotel but at the society's offices. It was an open event; there were no gatekeepers. Anyone who would pay the fee could attend. There were also no breakout meetings scheduled. Everything was on a presentation basis, either by a single person or a moderated panel.

In general, there was an industry theme - how to find and select good fund managers. Experts from different financial firms such as Brown Brothers, Bank of America Merrill Lynch and Avenue Capital spoke for about an hour on various topics in Wealth Management, took questions from the audience and gave their views on the current state of the markets. It was an opportunity to sell their products as well.

Anyone interested in experiencing a conference without being in a buy side firm can go to one sponsored by their local CFA Institute society. You can go to www.nyssa.org to view a list of conferences to attend. Unfortunately, the food is not as good as an investment bank's industry conference.

Industry Conferences

Buy side money managers and analysts are always seeking insight on the companies currently in their portfolios or on their watch lists. They are looking for any information that would affirm or change their investment thesis. One of the venues where this occurs is an industry conference sponsored by a sell side investment bank. Here, corporate clients such as Intel or Altria will send their officers to speak to the buy side either in a presentation or meeting.

This is where the size or importance of the firm make an impact. In the beginning, the salesperson will invite all their interested clients to the conference. The buy side representative will indicate which corporates they wish to speak to in a group or 1-on-1 basis. This is contingent on the corporates' availability. Some of them will only speak in a presentation setting. Others will desire to have meetings.

Depending on the conference and the sponsoring firm, conferences may or may not be exclusive. So the firm may allow all buy side requests to be approved for attending the conference. Other times, attendance will be tightly controlled. However, for all conferences, meetings and activities (such as golf outings) with corporates are controlled and scheduled by the corporate access team. The meetings and activities are where having a good research salesperson can help a buy side firm. Obviously, for the giants such as Fidelity, S.A.C. Capital or Capital Group; their requests are given precedence. But for a firm on the border, having an advocate that can persuade management to give them a meeting is invaluable and would result in a better broker vote.