Capital Markets & Investor Relations

IR Monitor – 26th October 2020

Investor Relations News

This week we begin by examining a brutal third quarter of dividend payments, although with some optimism for 2021. We then look at calls for ESG reporting standards in the mining industry, before discussing Microsoft’s strengthened commitment to diversity in the boardroom. We also explore the almost unanimous opposition to the US Securities and Exchange Commission’s changes to reporting requirements, before examining the top 500 asset managers of 2019 and the astonishing growth in passive management. Finally, we remind ourselves of why in-person investment conferences may be better left as a distant memory.

This week’s news

The only way is up

With around half of all British companies originally expected to make dividend payments cancelling their plans following a brutal third quarter, investors missed out on £18 billion compared to this time last year. Payments fell to the lowest third quarter level since 2010, a point in time when much of the UK was still feeling the effects of the financial crisis. The Telegraph, covering a report from Link Group noted that almost two fifths of the cuts came from banks, as they remain barred from paying dividends by the Bank of England. Investors can hold onto some hope however, as Link Group report that their worst-case scenario has been steadily improving throughout the year. The group have pencilled in April as the time when they expect to see dividends begin to increase again. Much however, depends on decisions made by the Bank of England.

Obtaining gold standard in ESG

Polymetal chief Vitaly Nesis has called for a set of common reporting standards on ESG in the mining sector, accusing the majority of current standards to be nothing more than a box to tick. Nesis told the Financial Times that often rating agencies lack the necessary analytical robustness to meaningfully pass judgement, instead producing relatively meaningless statistics. The Polymetal CEO believes a set of rules, similar to those used for international financial reporting would be of great benefit to all, stopping companies appear to be thriving when in reality they are not. Nesis is a big believer that genuinely positive ESG performance leads to stronger long-term financial results. Polymetal have for a long time been champions of ESG having become the first Russian company to join the Dow Jones sustainability Index in 2018.

A diverse succession plan

Microsoft have re-strengthened their commitment to diversity in the boardroom in their latest proxy statement made last Monday. The company, which currently has seven diverse members on its twelve-strong board, stated that they are “committed to actively seeking” diverse individuals to “include in the pool of potential CEO candidates”. While current CEO Satya Nadella has no plans to step down, the news is part of Microsoft’s wider commitment to becoming more diverse, especially at the top level. This year has seen Microsoft greatly enhance their desire to lead on inclusion issues, reported CNBC, with many other steps being taken.

Discontent over disclosures

The US Securities and Exchange Commission’s proposed changes to reporting requirements have been opposed by 99% of companies and investors. The proposals, announced in July, would allow money managers with less than $3.5bn of assets to avoid quarterly disclosures of stock positions. The Financial Times reported that a widespread concern is that the sharp increase from the current threshold of $100m could allow investors to quietly build up stakes and attempt to force companies into new strategies. SEC chairman Jay Clayton says that the current requirements place an “unnecessary burden” on smaller fund managers, a claim which has been met with scepticism by funds and industry bodies.

The world’s largest asset managers

The Thinking Ahead Institute Pensions & Investments 500 was published last week, examining the world’s largest asset managers in 2019. Whilst BlackRock maintained its position as the largest asset manager in the ranking, the study highlighted the fast-changing nature of the investment industry, with 232 names from the 2009 list of the 500 largest AMs not making the cut in 2019. The requirements for returns are increasing among clients, which in turn is favouring products which may involve higher risk. A key industry-wide observation was the significant impact of Covid-19 with regards to the use of technology, most notably the switch to a remote working operating model. Another observation (and one which represents an arguably existential threat to the IR industry) was the astonishing development of passive asset management; this increased by 25%, thereby resuming the growth trend of previous years.

And finally… have we all forgotten how boring investment conferences were

With in-person conferences currently a distant memory, readers can be forgiven for remembering such events through rose-tinted lenses. John Authers in Bloomberg however, took great pleasure in reminding us just how truly painful such events can be. A blur of coffee, hotel ballrooms, PowerPoint slides and awkward conversations; being at such an event makes hours in the home office seem delightful.

Conferences

October 27-28: S&P Global Reinsurance Conference (Virtual)

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