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WALL STREET JOURNAL.
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FINANCE
In Boston, Money Managers Fire Shot at Wall Street Brokers
Investor conference next week will cut banks out of a lucrative
role
Investors with $9 trillion of assets will meet with CEOs of two
dozen of America’s biggest companies. PHOTO: PHOTO ILLUSTRATION
BY EMIL LENDOF/THE WALL STREET JOURNAL; PHOTOS: ISTOCK |
By
Liz Hoffman
March 4, 2020 7:05 am ET
The world’s biggest money managers and dozens of
corporate chief executives will gather in Boston next week. No bankers
allowed.
It is the first in a series of
planned conferences where big shareholders can mingle directly with corporate
management, cutting banks out of their lucrative role as Wall Street’s
matchmakers. Investors with $9 trillion of assets will meet with CEOs of two
dozen of America’s biggest companies, including Walmart Inc.
and Coca-Cola Co., according
to emails reviewed by The Wall Street Journal.
The organizers are a
loose coalition of rival money managers: Fidelity Investments,
Capital Group, T.
Rowe Price Group, Wellington
Management and Norway’s government fund. A second gathering for health-care
companies and their investors is set for November.
The insurgency threatens a status
quo on Wall Street, where banks earn millions of dollars in fees brokering
meetings between their investor clients and their corporate clients. They
arrange what are known as road shows ahead of stock offerings and take
shareholders on field trips through factory floors, often charging thousands of
dollars a head.
That business, known as corporate
access, has been a key moneymaker for banks. Investing clients reward them with
trading commissions, and corporate clients reward them with underwriting and
merger-advisory mandates.
Changes in regulation and market
conditions now threaten that cash cow.
Top-tier asset managers, bigger and more
powerful than ever, can get through to corporate managers without an
introduction from a Wall Street broker.
They are also under pressure to cut
costs as fees shrink, and new regulations in Europe require funds to account for
every penny spent on research and corporate access.
The effort is just the latest
assault on banks’ role as Wall Street’s middlemen. Companies are increasingly
borrowing straight from loan funds instead of hiring a bank to place the debt.
Online platforms allow investors to trade directly with each other without a
bank to connect them.
More than 20 consumer-staples
companies are expected to send their top brass to next week’s conference in
Boston, including well-known names such as Clorox Co. and
newcomers like food-delivery provider DoorDash Inc., which is getting ready
to go public. (The conference could yet be postponed or scaled down
because of the spread of coronavirus.)
The attendee list, reviewed by the
Journal, has a combined market value of nearly $2 trillion and includes five of
the 10 biggest components of the S&P 500 consumer-staples index. The health-care
conference set for November in Baltimore, T. Rowe Price’s hometown, is expected
to draw executives from Johnson
& Johnson
and
Bristol-Myers Squibb Co., among
a dozen others, said people involved in its planning.
“We continue to find value in the
access to corporate leaders that Wall Street has facilitated over many years,
although we are supplementing these engagements with our own direct
corporate-access program,” said a spokesman for T. Rowe, which manages $1.2
trillion.
Word of the conferences has caused
consternation among banks. Next week’s event coincides with a Bank
of America Corp.
consumer-goods conference, where Macy’s Inc.
and Dick’s
Sporting Goods Inc.
are set to pitch to investors.
It has also sparked worry among
smaller asset managers not invited into the club. While CEOs aren’t allowed to
share corporate secrets at closed meetings, investors focus on their tone
and body language in the hopes of picking up useful information. It
appears to work: A 2011 academic study found that fund managers who attended
corporate meetings made more money than those who didn’t.
The planned conferences won’t
include public presentations by CEOs, but rather a series of 75-minute
one-on-one meetings, attendees said. That means companies won’t have to disclose
the meetings or release webcasts or transcripts of what is discussed.
Some companies are wary of riling
big banks, whose money they borrow. A spokesman for Walmart said that “most of
the conferences we’re going to this year are broker-sponsored.”
Write to Liz
Hoffman at liz.hoffman@wsj.com