Extel 2018 Market Trends Report
- 1. Understanding themes and market practice across the research provision landscape
- 2. FOREWARD “Extel captures market trends through supplementary questions during the annual survey process. There is no shortage of studies on market evolution; Extel is the largest in Europe, gathering 1.28m responses from 11,333 investment professionals during a five-week period in March/April 2018. Insights gathered from the survey guide business leaders through decision-making challenges that are a consequence of regulatory change. Imagine if this trend analysis was customised to your client base, split by geography, sector or client tier? How do the clients that you service value brokerage and advisory services compared to the market or your competitors? Extel can present the conclusions that you need to help drive your business strategy.” Buy-side clients value written research most out of advisory services, and want this delivered passively (through email or a third-party portal). Endorsed by Extel’s pulse survey in Nov 2017 where the buy-side valued research 20% more than the sell-side believed; this trend varies materially across different client demographics. Direct analyst access and roadshow meetings are valued more than analyst calls. Like research, this trend moves materially according to the client base that is scrutinised. Anecdotal evidence suggests that there has been significant pushback on analyst meetings in Q1 & Q2 2018, although this is easing off as a “spend it or lose it” mentality starts to kick-in. Research: Back to Basics? Aligned to how the Buy-side voted for research coverage in the traditional survey, there is a clear trend towards stock coverage / fundamental research. This suggests the Buy-side (as a theme) want research providers to focus on the nuts and bolts of research provision rather than ideas, thematic and macro content. Access to liquidity is a consistent theme across execution trend feedback, in selection of electronic trading and high-touch sales trading. There is speculation that this may sound the death knell for brokers without a balance sheet. There is a shift in the use of IR budgets from formal disclosure & AGMs towards external IR services and analyst days. Analyst days are getting smaller but there is the realisation that the onus of investor outreach is shifting to the corporate.
- 3. WHY EXTEL? Market Intelligence Client StrategyBest Practice
- 4. HOW WE CAN HELP? Marketing Intelligence Q. Are you focused on the right areas? How do you compare? A. Understand the key themes that the Buy-side, Sell-side and Corporates are focused upon. Best Practice Q. What can you learn from those that do well in voting? A. Understand the correlation between the best performers, their structure and approach. Client Strategy Q. How do your clients want to engage with their vendors / partners? A. Understand the preferences and focus of a discrete client base.
- 6. METHODOLOGY & COVERAGE DEMOGRAPHICS: MARKET TRENDS We present the conclusions from the Market Trends questions gathered during the Extel 2018 survey; over 1.28m responses from the 11,333 participants. Voters were presented with 14 questions across the following categories: • Research / Sales (5) • Trading & Execution (4) • SRI / ESG (2) • Corporate Access (1) • Derivatives (1) Please note: These results present the responses at a macro level. Extel is able to provide incremental and customised analysis at the following levels: • Buy – side Geography (e.g. How did German-based buy-side firms respond) • Categories & Sectors (e.g. Buy-side firms voting in the Banks Sector) • Band (e.g. Buy-side firms within the Band 10 category) • Peer Group (Bespoke buy-side feedback, a minimum of 15 firms required) • Benchmarking - buy-side firms that voted for a specific sell-side firm Should you have any further questions please do not hesitate to contact us. Buy side Votes Firms: Individuals: 2,682 7,721 Sell side Votes Firms: Individuals: 241 2,040 Corporate Votes Firms: Individuals: 1,099 1,572 1.28m Votes
- 7. RESEARCH SALES DEMOGRAPHICS: MARKET TRENDS QUESTION ONE: QUESTION TWO: QUESTION THREE: What Sell-side advisory services do you value? How do you rate the value of the following research products from sell- side research? How do you rate the value of the following attributes of a sell-side research service? Category: Research Sales Participants: All Voters (Aggregate Results) Responses: 9105 Less Important More Important Corporate Access Sales Research Market Commentary Valutation Models Company Notes & Updates Local Market Insights Sector Insights Stock Coverage Global Context Timeliness Contrarian Views Independence Long-Term Themes Local Market Insights Sector Insights Stock Coverage
- 8. RESEARCH SALES DEMOGRAPHICS: MARKET TRENDS QUESTION FOUR: QUESTION FIVE: How do you rate the value of the following attributes or services from sell-side research? How do you rate the value of the following delivery channels for sell-side research? Less Important More Important Incoming Analyst Calls Direct Analyst Access Written Research Research Aggregator Sell-Side Portal Email Written Research Direct Analyst Access Roadshow 1x1s Roadshow Group Meetings Incoming Analyst Calls Reverse Roadshows Sell-Side Portal 26.5% Research Aggregator 23.4% 14.8%Hard Copy 35.3%Email Less Important More Important Category: Research Sales Participants: All Voters (Aggregate Results) Responses: 9105
- 9. TRADING & EXECUTION DEMOGRAPHICS: MARKET TRENDS QUESTION ONE QUESTION TWO: QUESTION THREE: What do you value in… Electronic Trading? …Program/Portfolio Trading? …Sales Trading? Category: Trading & Execution Responses: 342 Less Important More Important Analytics pre/during/post trading & TCA Access to unique liquidity Performance of algos Market impact Performance of execution platform Quality of service High touch service Market impact/quality of execution Ability to find liquidity in Small & Mid Caps 5.45 5.55 5.7 7.5 7.7 8.5 9.5 Participants: All Voters (Aggregate Results)
- 10. NON CASH / DERIVATIVES DEMOGRAPHICS: MARKET TRENDS QUESTION FOUR QUESTION FIVE: Delta One/ETFs services? Convertibles & Derivatives Research? Category: Non Cash / Derivatives Responses: 293 Less Important More Important High touch service Access to capital and risk pricing Market impact/quality of execution Liquidity & Trading… Sales Service Trade Ideas 59 55 49 46 39 Trade Ideas Sales Service Liquidity & Trading Capability Integration Of Analysis With Underlying Equity/ Bond Direct Analyst Contact What do you value in the following… Participants: All Voters (Aggregate Results) What do you value in the following…
- 11. SRI / ESG DEMOGRAPHICS: MARKET TRENDS QUESTION ONE: QUESTION TWO: What do you value in SRI/ESG Research/Analysis? To what degree do you agree with the following statements? Category: SRI / ESG Participants: All Voters (Aggregate Results) Responses: 172 Climate Change/Green Issues Stock Specific Analysis Thematic Pieces Research Less Important More Important Disagree Disagree Disagree Agree Agree Agree 0% 20% 40% 60% 80% 100% Companies Take Sustainability Seriously CSR Reports are Valuable Sustainability Issues Impact Stock Values 15.5 17.7 18.6 20.3 27.9 Depth Of Coverage Integration Into All Research & Advisory Services Climate Change/Green Issues Stock Specific Analysis Thematic Pieces Research
- 12. CORPORATE ACCESS DEMOGRAPHICS: MARKET TRENDS QUESTION ONE: QUESTION TWO: QUESTION THREE: Please value the following company & expert meeting services? Which Factors are Important when Measuring IR Effectiveness? Category: Corporate Access Participants: All Voters (Aggregate Results) Responses: 78 Legend: = 2017 = 2018 0 5 10 15 20 Conference 1x1s Conference Group Meetings Conference Main Tracks Reverse RoadshowsIndustry Experts Roadshow 1x1s Roadshow Group Meetings Low High Relative Stock Price Volatility Market Surveys Perception Studies Board Satisfaction Composition of Investor Base Investor/Analyst Feedback Which social media channels do Companies use for IR activities? Less Important More Important Roadshow 1x1s Conference Group Meetings Conference 1x1s 1.9 1.5 Other 1.4 2.1 1.1
- 13. CORPORATE ACCESS DEMOGRAPHICS: MARKET TRENDS QUESTION FIVE: What type of Sell-side research coverage do Corporates find useful? Category: Corporate Access Participants: All Voters (Aggregate Results) Responses: 78 = 2016 = 2017 = 2018 Recommendations Sector Research Morning Notes Company Report Target Prices High Importance Low Importance * Target Prices Introduced in 2018 * Legend
- 14. BUDGET BREAKDOWN: SALARY SPLITS BY ROLE:POSITION: Award: Regional Level Period: 2018 (2017 / 2016 where detailed) 2018 2017 2016 <€250k €250k-500k €500k-1m €1m -2m >€2m ALLOCATION OF IR BUDGET: IR DIRECTOR SALARY IR MANAGER SALARY IR ASSISTANT SALARY <€50K €50-70K €71-100K €101-120K €121-150K €151-200K >€200K COST STRUCTURE IR BENCHMARKS 2018 2017 2016 Roadshows/Investor meetings Analyst/Investor days IR website Annual report/Formal disclosure/AGM External IR service
- 15. FREQUENCY OF ANALYSTS DAYS: NUMBER OF BROKER CONFERENCES – SPLIT BY ROLE:POSITION: WITH CEO/CFO WITH IR- ONLY WITH DIVISIONAL DIRECTORS OVERALL None 1-2 3-5 6-9 Over 9 Never Once a Year More than Once a Year Once Every 2 Years2017 2016 2018 2017 2016 10-20 21-30 31-40 41-50 Over 50 NUMER OF PEOPLE INVITED: Inner = 2018 Middle = 2017 Outer = 2016 2018 INVESTOR ENGAGEMENT Award: Regional Level Period: 2018 (2017 / 2016 where detailed) IR BENCHMARKS
- 16. LOCATIONS VISITED: NUMBER & TYPE OF MEETING:POSITION: ORGANISATION OF CORPORATE ACCESS: UK USA(EastCoast) France Germany Switzerland Nordics SouthernEurope USA(WestCoast) Asia Benelux Canada Japan None 1 2 3+ CEO/CFO One-on-ones CEO/CFO Group Discussions IR-only One--on-ones IR-only Group Discussions Divisional Director One-on-ones Divisonal Director Group Discussions Overall 0-50 51-100 101-200 201-300 Over 300 INVESTOR ENGAGEMENT Award: Regional Level Period: 2018 (2017 / 2016 where detailed) IR BENCHMARKS