IR Monitor – 27th September 2021

This week’s news

Investment management AUM grows to £9.4trn despite tumultuous 2020 

Assets under management held by Investment Association members grew to £9.4 trillion in the UK by the end of 2020, an increase of 11% compared to the previous year, according to the Investment Management Survey. After New York, of course, London remains the clear destination of choice for company roadshows: It is the largest investment management centre in Europe with a market share of 37% which is larger than the combined total of France, Germany, and Switzerland. Reporting on the latest findings, Investment Week highlighted how the recovery and resilience of the industry through the Covid-19 pandemic has been attributed to quick adaptation to home working, a focus on delivering for customers, and crucial interventions from the central banks. According to Chris Cummings, chief executive of the Investment Association, “The investment management industry demonstrated its long termism through the pandemic by supporting the companies it invests in”.

UK companies urged to improve long-term viability disclosures to investors

A recent Financial Reporting Council review of information published by 30 main market and Aim-listed companies has found that many were failing to properly explain the assumptions and judgments underlying their disclosures on going concern status and the longer-term viability of their businesses. The Financial Times noted that the regulator said “companies can, and should, do a better job of providing more granular information” and that there was a particular onus on companies facing greater uncertainty to provide more detail in their accounts and annual reports. The FRC stated that some companies were also failing to take account of significant events that could affect their liquidity and that these should be considered even if they were more than 12 months away. At present, the government is considering whether to proceed with a proposal requiring companies to publish resilience statements. Until then, the FRC has called for companies to extend their viability statements and provide longer-term information where possible.

The rise and unexpected benefits of virtual investor relations 

When the pandemic first broke last year, there was significant concern over the damage and disruption that might occur to the stock market and public company valuations. However, IR Magazine has analysed how the pandemic has changed investor relations, in many ways for the better, for both issuers and investors. An unexpected positive to come from this tumultuous period has been the ability for company executives to present virtually, essentially free of geographic constraints. For investors, there has consequently never been an easier time to gain access to company executives. For companies, it is a great time to maximize exposure to investors by presenting and meeting virtually with investors, however far-flung, as frequently as they wish.

Inflation worries loom large during company earnings calls 

According to a FactSet report cited by CFO Dive, S&P500 executives mentioned inflation during earnings calls more than at any time in at least a decade. Among CFOs, those in industries involving durable goods expressed doubts as regards to the Federal Reserve’s optimistic stance that price hikes are only temporary and are set to slow. Adding to their pessimism, a recent FitchRatings memo argues that supply chain challenges are proving particularly hard to meet in key industries such as building and materials, thus limiting companies’ ability to benefit from strong demand and to charge higher prices. Nonetheless, the FactSet report also notes that analysts and corporates have been much more optimistic in the latest round of results. Analysts forecast that earnings will grow more than 20% during the fourth quarter compared to the previous year.

Chevron would rather pay dividends than invest in renewables 

American oil supermajor Chevron Corp has recently provided further justification to the belief that American fossil fuels companies are much less keen than their European counterparts to jump on the energy transition bandwagon. In a recent CNBC interview relayed by Reuters, Chief Executive Officer Mike Wirth said that his company would rather hand back money to its shareholders than pour capex into expensive solar and wind power projects. Wirth noted that renewables still generate low financial returns, while investors could use dividend payments to invest directly in green energy companies. Arguing for focused operations, rather than haphazard diversification, Wirth’s comments are a refreshing defence of shareholder primacy: “We rather dividend it back to shareholders and let them plant trees,” Wirth said.

And finally … CEOs and the benefits of deep, “manly” voices 

In a somewhat surprising twist on the traditional complaint that corporate structures are biased on the basis of gender and ethnicity, a Northwestern University study flagged by Quartz has suggested that one’s voice may also play a key role in inspiring confidence. The paper focused on the career progression of a number of FTSE 100 executives over a 10-year period. The study collected voice samples from each CEO, analysing them based on a number of factors such as “format dispersion,” a measure of resonance that helps shape perception of vocal deepness. This is a very helpful factor since it does not vary with age and is difficult to actively manipulate. The resulting conclusions were that CEOs with a higher “vocal masculinity” tended to have higher total pay, with an average 6.6% upside. While the study only included 5 female CEOs (which is probably too little to draw meaningful conclusions), the piece raises the obvious question of whether voice depth unduly sways board members towards male executives, possibly mistaking vocal depth with perceived strength.

Contact Us

To be added to the distribution list for the IR Monitor, or for further information on the dedicated investor relations team at FTI, please contact [email protected].