It’s perhaps not surprising that Stockholm, home to the music-streaming giant Spotify and a large stable of world-beating start-ups, played host to Q4’s “Breakfast Briefing” on the subject of how technology is changing the everyday lives of modern IROs. Attendees listened to a panel of experts and fellow IROs at the opulent 19th century Grand Hôtel, which sits on Stockholm’s waterfront opposite Gamla Stan, the city’s ‘old town.’
The theme of “old meeting new” and “routine processes feeding innovation” was a central thread of the day’s discussion. An all-star panel – made up of Amit Sanghvi, Managing Director for Europe at Q4, Patrik Säfvenblad, Chief Investment Officer at local investment house Volt Capital Management, and Julie Silber, Senior IR Adviser at Wildeco – were tasked with revealing how the buy side’s use of technology is impacting the day-to-day of investor communications, and how IROs can turn the technological tables with their own tools.
Ironically, an early show of hands found that even in tech-savvy Sweden, most of the IRO audience did not already use modern-tech tools as part of their IR program. Nor did they plan to actively leverage them in the near future. Sanghvi attributed this to some concerns an IRO might have around tools automating the job, a role that hinges on forging personal relationships with shareholders, analysts and the overall investment community. Addressing this concern, he emphasized that sophisticated CRM platforms like Q4’s “are not here to ever replace IROs.” Sanghvi explained, “The idea is to give them the ability to elevate themselves from the day-to-day and provide strategic value, both internally and externally.”
This was a consistent point of discussion, particularly when it came to examining investor targeting approaches. Sanghvi said most companies require an array of approaches and strategies to attract different shareholders and investor mixes, including current shareholder movement, peer ownership and quantitative big data analysis. Examining so much data, however, can “make your head explode,” said Sanghvi, who instead recommends solutions like algorithmic analysis and machine learning, technologies which are able to process huge quantities of data, learn from that data and draw conclusions on the fly.
Sanghvi explained that “algorithms and machine learning work hand in hand, to draw dynamic and sophisticated conclusions, without any predetermined bias.” These technologies can reveal hidden trends about your shareholder base and the investors who might soon be shifting into, or out of, your stock. They can also automate repeated tasks and free up your time to concentrate on your ultimate goal – shareholder value – he noted.
Despite being a self-confessed newbie to such tools, Silber had a chance to play around with Q4’s CRM platform which leverages AI Targeting. She illustrated an interesting case in which one of her Swedish clients – a mid-cap life sciences firm – had few matches with domestic investors. At first, this concerned her, but Silber came to realise that the tool had fairly judged multiple domestic investors to either already be current investors or legitimately not a good fit. To her surprise, it identified a big name in a far-flung state, Alaska, that looked like a perfect match. Silber explained that this helps a company avoid beating on the same doors, and instead attract capital from new, relatively untapped sources.
Silber underscored the importance of leveraging technology to more accurately target “different levels of investors that create the proper makeup for your company” – but added that this was only actually possible with an IRO’s expertise at the helm. While tools and automation can save on time-intensive labour, enacting the right shareholder strategy for your firm “only comes when you have the right plan in place,”she explained. Tasks like organising a stressful investor roadshow – when “nothing stays on your calendar, or the C-suite changes its dates, or something comes up,” says Silber – still need an IR professional’s expertise to plan efficiently, create true shareholder value.
Säfvenblad linked up with this point, and said that one of the best applications of tools that examine your shareholder base or potential investors is to use the data produced to “regression-test” your own assumptions about your firm’s investor base. Comparing what you or your C-suite thinks about existing shareholders or potential targets with what the data tells you can be crucial to forming a well-rounded strategy, he explained.
Säfvenblad oversees the investment thesis at Volt Capital, a Stockholm-based family investment office, which also advertises itself as a machine learning manager. It uses a system that also analyzes large amounts of market data to mitigate risk and promote compliance. From a disclosure perspective, Volt puts a premium on “data comparability.” Säfvenblad explained that “a company needs to ensure that a full raft of data points is available on the IR website, with minimum effort on the investor’s part.” If that full set of data is not there, Volt may not consider a company for investment at all.
A final tip from Säfvenblad was to not just consider the “9 to 5” time-saving benefits of these tools, but also the massive impact on “your 5 to midnight crisis handling situation.” When quick decisions have to be made in tight circumstances, extra intelligence about your shareholder base, your competitors or the market at large could make all the difference, he added.
After attendees had the option to discuss these points during separate roundtables, the panellists reconvened to give their parting thoughts. Sanghvi’s final conclusion rang true with the thesis that the technological solutions discussed could be best employed under an IRO’s expert eye.
“Last year, MiFID II was about figuring out how the new investment infrastructure would fit together,” he explained. “This year we are anticipating even more sell-side analyst cuts. That gap can best be filled by an IRO’s expertise and specialist knowledge, backed by the extra time and information afforded by advances in technology.”
A final poll of the IRO audience proved his point had been well made: nearly half of the room were now convinced to dedicate budget to data analysis tools and advanced platforms.