Capital Markets & Investor Relations

IR Monitor – 9th November 2020

Investor Relations News

This week we begin by discussing UK fund managers’ optimistic belief that the second national lockdown will not trigger a second wave of dividend cuts. We then explore how, in light of the ongoing pandemic, hygiene has moved itself to the top of an ongoing list of boardroom issues. We also look at the third-quarter earnings of S&P 500 companies, which, despite falling, outperformed Wall Street expectations. Next, we examine the growing world of Special Purpose Acquisitions Companies (“SPACs”). We also revisit the future of the office, as tighter government restrictions spark another exodus from London workplaces. Finally, we look at an existential question: is there a future for active fund managers (and, by extension, a future for investor relations)?

This week’s news

Fund managers confident lockdown will not lead to second wave of dividend cuts

According to Investment Week, UK fund managers are optimistic in their belief that the worst is now behind us and that the second national lockdown that began in the early hours of Thursday morning won’t trigger a further round of dividend cuts. The assumption is that this time government regulations are less restrictive, those in the sectors suffering the most have already halted paying dividends and that those more fortunate have had sufficient forewarning to adequately prepare. Some, however, are more sceptical – one analyst from Peel Hunt has suggested it only rational to assume this lockdown will continue on past the initially planned 4-week mark.

CEOs, take note: hygiene is now a boardroom issue 

Just as anti-smoking regulations changed the entertainment industry, City A.M has warned companies and boardrooms that this pandemic will forever change the way consumers think and crucially the way businesses operate around hygiene. This new and arguably unprecedented boardroom issue presents both challenges and opportunities, as the potential for company leaders to be liable if health and safety is improperly accounted for has skyrocketed. At the same time, if employees and consumers alike can see visible safety measures in place to effectively protect them against this unfolding pandemic, businesses have an opportunity to point score with relative ease. Investors who have seen national cinema chains shut and commercial property companies struggle to collect rent amid widespread safety concerns, will be watching.

Could the worst be over for the US?

According to the Financial Times there is reason to be positive as we head towards this year’s close. S&P 500 companies declared a much smaller fall in Q3 profits and sales than was predicted by analysts on Wall Street. As reported by the Factset data, businesses have declared total profits per share nearly a fifth higher than forecast only a few weeks previously. Mega-cap stocks, most notably Apple and Facebook, have helped steer the rise in sales, while consumer essentials such as Proctor and Gamble also achieved healthier results than was perhaps pessimistically predicted.

London city exodus resumes

The return to work was a false dawn. Goldman Sachs and Deutsche Bank have restarted the latest exodus from London by telling staff not to come into the office. The Telegraph reported that in a memo to its 5,000 City staff, Goldman’s international boss Richard Gnodde ruled that only those who have been told they are “in-office essential” can re-enter the office. Deutsche Bank, one of London’s biggest employers with 8,000 UK staff, told its bankers that the “majority of those currently spending time in the office will be asked to work from home”. The latest lockdown could push more City firms towards making permanent changes to office life. Other institutional investors, including Standard Life Aberdeen, told workers months ago to stay home until 2021. Meanwhile, Schroders is among those to have already told staff they will never have to come into the office five days a week again.

SPACs give bankers another slice of the pie

Investment banks know a fee opportunity when they see it. This year, the big opportunity has been offerings of “SPACs”, which list shares on the public market with the intention of buying another business later. Reuters contends that while the fees for traditional IPOs are higher, SPACs deals aren’t too far behind. A traditional IPO can pay its bankers up to 7% of their total offering value compared to 5.5% for SPAC deals. Since normally their only asset is cash when they list their shares, in the case of SPACs investment bankers don’t have to worry about getting the valuation right or harming their client’s reputation if the offering doesn’t go so well. SPACs do not typically appoint an Investor Relations Officer until they have made a suitable acquisition.

And finally… is there a future for active managers?

According to industry veteran Martin Gilbert, active fund managers need to stop making excuses for poor performance. Financial News reported that despite charging more for their expertise, active funds have consistently failed to beat index-trackers, even during the volatility in the first quarter that should have provided them with an opportunity to outperform. This has led to a large flow of money from active managers to cheaper passive funds. And that trend is set to continue, with BlackRock recently predicting that European ETF assets could double to more than $2trn in five years.

Conferences

November 9-11: Credit Suisse 29th Annual Healthcare Conference (Virtual)

November 9-13: UBS European Conference (Virtual)

November 17-18: RBC Global Technology, Internet, Media and Telecommunications (Virtual)

November 16-18: Stifel Healthcare Conference (Virtual)

Contact Us

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