Private
Workshop Report: Investor Support Requirements
Initial Observations from Interviews of Individual Stock Investors
–
Matching the Advantages of Major Fund Managers –
To
guide our plans for providing individual investors with the kinds of
support the Forum had developed for its founding fund managers, market
researcher Ashley Taylor has interviewed more than a dozen people with a
wide range of approaches to stock investing to hear their suggestions of
what individuals and their advisers would need to effectively select and
monitor companies.
The
observations naturally varied, but all of the high priority suggestions
were for types of access – to decision-making information,
to influence, and to opportunities – that the
investor viewed as available to the big fund managers but not to
individuals or their advisers. In fact, virtually all of these access
advantages of big fund managers had been developed for them by the Forum
in its early programs to support our institutional participants.[1]
We can take pride in the success of those efforts, but it is of course
also somewhat discomforting that we had until now ignored broader
marketplace interests.
Preliminarily, we are categorizing the kinds of support that the
individual stock investors considered valuable as follows:
-
C-Level Access
– Nearly all of the interviewees, regardless of investing patterns and
preferences, expressed awareness of the ability of bigger fund managers
and influential bank analysts to meet privately with chief executives
and other senior executives of a company, primarily to better understand
the executives’ views but possibly also to influence their views.
Opportunities to ask questions and observe responses in public
exchanges, such as quarterly earnings calls or “investor day” meetings,
were consistently viewed as useful but much less meaningful than private
meetings. All of the investors assumed these informal meetings were very
valuable, even if the participants scrupulously observed rules about
avoiding “material” disclosures. Most of the investors noted that it
might not be practical for them, personally, to participate in these
informal meetings, but that they believed they could benefit
significantly from participation by a representative familiar with their
interests and questions.
-
Board Access
–
Interest in informal communications with a company’s board members, though
similar to observations relating to C-Level Access, above, was generally
limited to investors who considered “ESG” (Environmental, Social and
Governance) issues a high priority in their decisions, or who expressed
interest in recently publicized “engagement” activities of some asset
managers whose beneficiaries advocate corporate governance policies that
are often addressed at board level rather than by a company’s executive
managers.
-
Research Access
–
Although the type of research information that interested investors was
varied, ranging from analyst opinions to market research and even
databases, most of the interviewed investors cited some form of research
that they would consider useful if the costs – either money for
subscriptions or time spent organizing or digesting, or both – could be
reduced to justifiable levels. Several of these investors naturally
suggested opportunities for the Forum or others to aggregate investors
for sharing such costs for what could be considered a relatively simple
“efficiency” benefit.
-
Observer Access
–
Many of the investors expressed interest in being able to develop
networking relationships with people whose insights might be useful,
such as analysts, industry experts, academic researchers, customers, and
other investors.[2]
This interest in opportunities for direct, informal exchanges of views
was distinct from access to research reports.
-
Deal Access
–
Though cited primarily by the more experienced investors familiar with
private equity or the Berkshire Hathaway private investment practices, the
investors who suggested support of participation in privately negotiated
investments typically considered this kind of access to have the greatest
potential value. Notably, this interest was raised by investors who had no
previous experience with Forum projects as well as by those who had
actually participated in Forum projects that supported access to private
transactions
Your
questions and any comments will be welcomed, as usual, either on the
subject of the individual investor interviews or on what we should be
addressing in the next phase of interviews with professional advisers to
learn how they think the desired support can be most effectively
delivered.
Of
course, I also want to thank Ms. Taylor and all of the investors who
volunteered their time and thinking to help us understand what is really
needed for ultimate investors to benefit from fair access to information,
influence and opportunity.
GL – March 7, 2018
Gary
Lutin
Chairman, The Shareholder Forum
575
Madison Avenue, New York, New York 10022
Tel:
212-605-0335
Email:
gl@shareholderforum.com