At the end of 2014, entities in North America held 50 percent of the $US74 trillion of assets under global fund management. A further 52 percent of total US assets under management were allocated to equities. In June 2015, almost 20 percent of US investment in equities was allocated to foreign equities, a trend building since 2013. For Australian businesses seeking investment to innovate and grow, there is a chance to seize this opportunity. But how?
When we look at the average institutional ownership of the S&P/ASX200, North American investors account for around 27 percent – the most significant investor group after domestic investors. That figure may grow: with each of the past 10 quarters seeing positive net flows by US mutual funds into international equities. The relatively low Australian dollar against the US dollar boosts the attractiveness of Australian equities. Many Australian companies are already tapping into this rich source, but for those who aren’t, opportunity is vast.
However, successfully attracting and retaining the right institutional investors takes careful planning. Building long term relationships with North American equity investors that can withstand changing market conditions is key.
It is vital to focus on the approximately 175 North American institutions that account for over 90 percent of international equity investment. However they are spread across both the US and Canada, making investor roadshow trips to North America potentially time consuming.
A good starting point is two visits by the CEO or CFO to New York and Boston each year, with an annual visit to Toronto. This can be supplemented by attendance at conferences and roadshow activity by the investor relations team.
Identifying investors with a long term investment horizon is vital, in order to talk to the people who will potentially buy and hold the stock. North American investors tend to focus on competitive position and long-term strategy rather than the most recent financial results.
Attracting and retaining North American investors requires the full support of the executive team and the board of directors, and an investor relations team that has a clear and comprehensive plan in place.