as ferramentas de targeting

Capital Precision Ltd

Investor Targeting – Theory and Practice

Capital Precision

� We specialize in helping Companies (and their Advisory Banks) identify

who are the beneficial owners of their shares, who manages the

investment decisions and who to target as new investors

� We are employed for both Investor Relations and Corporate Transaction

projectsprojects

� We work for approx 200+ Blue Chip companies and 24 Banks

� 50+ years of collective experience

� Awarded the contract to provide CMI Services to the London Stock

Exchange IR Solutions team, Nov 2005

2

Targeting – A Complex Challenge

� What will happen if you take management on a world

tour of investment centres and no-one buys the shares?

� What shareholder structure are you trying to achieve?

� How do you decide where to go?� How do you decide where to go?

� How do you decide who to meet with?

� What criteria did you use to evaluate your targets?

� How do you know if it was successful?

Know your customer

� Who is the customer?

� What is motivating them to buy (or sell)?

� What do you need to do to keep them?

Targeting is a marketing discipline

� What do you need to do to keep them?

Where do you find more of the same?

� How do you determine where they are and what will motivate them to buy?

� How do you measure whether your IR Programme is working?

4

Targeting is about prioritisation

� There are over 40,000+ funds under management around

the world, you cannot meet them all

� The challenge is to filter the 40,000 down to the investors

who are going to be most interested in your investment

story

Targeting is about achieving a balanced

shareholder base?

Stability or turnover? Passive or active?

Hedge Fund

Income

Country/

Sector Focus

Yield Broker

Dealer

Aggressive Low

High

Index

Hedge Fund

Value

GARP

Growth

Aggressive

Growth

Low

Medium

Investor Targeting – The objectives

� Maximize demand for the shares – This cannot be achieved if it is left to the market to determine who will be buying your shares

� The challenge is to find investors whose investment profile matches your future investment proposition

� The challenge is to find investors whose investment profile matches your future investment proposition

� The better the Targeting, the better control there is over the shareholder structure

Targeting – A Strategic Planning

discipline

� In an ideal world a company would have a clear objective

of the types of shareholders they would like to have in the

future

� The targeting process should be based upon anticipating � The targeting process should be based upon anticipating

what is likely to happen and not based upon what has

happened

� The targeting process must be measurable

� Is there a transaction anticipated?

� Who will support the company in the transaction?

� Who holds the voting power?

� Do you want more passive or active investors?

� Are you looking for liquidity or stability?

Structuring the shareholder base

� Are you looking for liquidity or stability?

� Are you looking to diversify the shareholder base?

� Which shareholders are likely to rotate out and when?

� Which current investors could buy more shares?

� Who is not investing yet but could be?

� Which investors could be activist?

� Where are the strengths and weaknesses in the shareholder base?

9

The starting point for a Targeting Programme

� Step 1 - The “stock take” – Where are you now?

� Does your shareholder base reflect what you believe to be what you represent to the market?

� The first step is to have a clear understanding of who is already � The first step is to have a clear understanding of who is already holding your stock and why.

� The second step is to identify which shareholders could rotate out of the stock in the future

� The third step is to determine the impact that this selling activity is likely to have on liquidity and smaller investors

Investors Geographic Distribution

% Outstanding Standard Deviation% Outstanding

2.1

-3 -2 -1 0 1 2 3

28%

38%

0% 10% 20% 30% 40%

Domestic

High-Risk TypicalClient Value Peer Median

-0.2

-1.3

0.3

-0.7

18%

9%

5%

35%

20%

13%

4%

30%United

Kingdom

Rest of World

North

America

Cont. Europe

Investor Geographic Distribution

� Although increased foreign investment is often very much desired, dependence on any one region for support can have significant impact on the turnover of your shareholder base.

� Geographic considerations� Geographic considerations

� Perceived strength of your company’s country or region

� Regional/Global stability concerns

� Currency strength/weakness

� Governmental and/or regulatory impact

Concentration of Shareholders -

% Outstanding Held by Top Investors

2.2

-3 -2 -1 0 1 2 3

22%

35%

0% 20% 40% 60% 80% 100%

Top 5



0.2

0.2

0.6

63%

85%

39%

60%

80%

45%

Top 10

Top 25

Top 50

Concentration of Shareholders -

Regional Breakdown of % Outstanding

Held by Top 25


2.6

-3 -2 -1 0 1 2 3

15%

27%

0% 5% 10% 15% 20% 25% 30%

Domestic


-0.4

-1.4

0.0

-0.3

7%

14%

3%

14%

9%

19%

3%

12%United

Kingdom

Rest of World

North

America

Cont. Europe

Domicile of Top 25 Holders


1.8

-3 -2 -1 0 1 2 3

35%

60%

0% 20% 40% 60% 80%

Domestic


-2.8

-1.3

-2.1

-0.9

5%

15%

5%

19%

15%

22%

9%

15%United

Kingdom

Rest of World

North

America

Cont. Europe

Concentration of Shareholders

� Although it is often typical and potentially beneficial to have a few “anchor” investors at the top of the shareholder register, a shareholder base that is too concentrated can be cause for concern.

� Pricing impact

� Potential to trade in large blocks in the event of a bid or corporate action

� Disproportionate affect on voting

� Lower “real” float; liquidity

� Higher likelihood of regional concentration (as per previous page)

Size of Investing Funds

0.7

-3 -2 -1 0 1 2 3

36%

43%

0% 10% 20% 30% 40% 50%

Mega



0.0

-0.3

-1.0

16%

9%

42%

16%

10%

32%

Large

Mid

Small

Size of Investing Funds

� Attracting funds of various sizes requires different modes of outreach

� Larger fund managers

� Have an abundance of internal resources and heavily rely on in-house research

� Require direct one-on-one interaction with management

� Manage a large portfolio of securities which ultimately ends up being closely tied to an index benchmark portfolio

� Will most probably hold many in your peer group already; will try to outperform through re-weighting on a regular basis

� Smaller fund managers

� Less reliant on direct one-on-one management interaction; group meetings may be sufficient

� Will rely on sell-side analysis due to their limited in-house research

� Require accessible and good company information, presentations and disclosure

� Lack the resources to manage a broad portfolio

� Take large, opportunistic positions in a concentrated number of companies

� Can buy into or sell out of a large position very quickly

Active vs. Passive Funds

-3 -2 -1 0 1 2 3

71%

0% 20% 40% 60% 80% 100%



-0.5

2.4

82%

18%

29%

Active

Passive

Active vs. Passive Funds

� A balanced active vs. passive ratio of share owners can be important for the stability of your share price

� Positive impact of passive funds:

� Can provide a long-term base of support and demand for your shares

� Provide day-by-day liquidity

� Negative impact of passive funds:

� Supply and demand of your shares is reliant on regional or sector performance, not � Supply and demand of your shares is reliant on regional or sector performance, not specific company or management performance

� Positive impact of Active Funds:

� Tend to get closer to management and have more interest in the strategic planning and the business development

� Tend to be less share price sensitive and more milestone achievement focused

� Will separate your shares from regional or sector related performance

� Negative impact of active funds:

� React more quickly and dramatically to negative company fundamental changes and announcements

Special Situation Investor Distribution

2.8

-3 -2 -1 0 1 2 3

21%

0% 5% 10% 15% 20% 25%

Hedge Fund



-1.3

0.3

3%

9%

2%

5%

3%

Activist

Prime Broker

Special Situation Investor Distribution

� Hedge funds

� Are they in for the short term or long term?

� Are they event driven, arbitrageurs, or looking for instability?

� Activists

� Are they active investors or activists?

� Does the activist have support elsewhere in the shareholder base?

� Prime Broker

� Are they acting for securities lending, leveraged trade executions, cash management?

� Or are they acting for Hedge Funds?

Investor focus


0.7

-3 -2 -1 0 1 2 3

7%

14%

8%

0% 10% 20% 30% 40%

Contrarian


1.1

2.9

-0.3

0.3

-1.1

13%

11%

25%

19%

10%

5%

29%

18%

14%

21%

Generalist

Global

Market Cap

Regional

Sector

Investor focus

� It is important to be diversified among a broad spectrum of fund focuses

� Who am I attracting? Or equally as important – who have I yet to attract?

� Sector followers? Growth investors? Value players? Market cap specific funds?

� Which universe of peers are they comparing me against?

� Which benchmarks are my shares being compared against?

� Heavy weighting in any one focus area can yield swings in ownership and share price if the specific focus comes under pressure, or the demand from, or fund flows to, those types of funds change

Current Shareholder Entry Points

and Trading Exposure

50

60

70

80

30

40

Sh

are

Pri

ce

Ne

w E

ntr

an

tsShare Price

Price Paid by New Entrants

Pricing Trend Number of Entrants

0

10

20

30

40

C urrentQ1-09Q4-08Q3-08Q2-08Q1-08Q4-07Q3-07P revious

0

10

20

Current Shareholder Entry Points and

Trading Exposure

� It is assumed that investors which have suffered large losses or benefited from large gains are more likely to part with their shares.

� The aim is to best estimate when the current shareholders entered the stock so as to estimate the number of investors which would be considered likely to be at risk.

� The analysis should be viewed in the context of the general market and sector performance and be read in conjunction with the active versus passive analysis to give a picture of those individual investors at risk.

The next steps

� The primary goal of all Targeting Programmes is

to find investors who have both the appetite and

the capacity to buy your shares

� It is important is to look at the whole market and

then filter down and prioritise to identify those

targets that will best fit with your future

objectives

Step 1. Identify targets with the “Appetite” to buy

� Monitor current buying and selling activity in the peer group

How can targets be evaluated?

� Monitor current capital flows across the sector

� Monitor current capital flows across the region

28

Step 2. Identify Targets with the capacity to buy

� Net asset value of the fund

� % Fund exposure to the sector

How can targets be evaluated?

� % Fund exposure to the sector

� % Fund exposure to the country

� % Fund exposure to the rest of world

� Top 10 holdings of each individual fund

29

The “Weighting” objective

� Most Targeting methodologies rely on a “Weighting Principle”

� This is achieved by identifying funds/institutions that are currently overweight in the peers/sector/region but underweight in youcurrently overweight in the peers/sector/region but underweight in you

� The goal is to be at least fairly weighted

� The objective is to identify funds/institutions that are currently buying into the peers/sector/region

Is this objective being achieved?

� No, for two fundamental reasons

� A Weighting Analysis cannot easily be achieved by � A Weighting Analysis cannot easily be achieved by

using the usual data sources

� Therefore most Targeting Programmes start from

an incorrect view of the market and can send you

in the wrong direction

“Public Data” sources – The problems

� The lack of “up to date” information

� The lack of complete information

� “Public Data” sources do not identify who makes

the investment decisions for multi-managed and

outsourced funds

The lack of “up to date” information

� The information that is made available in the

public domain consists of Regulatory Fund Filings,

Declarable Stake threshold breaches, “Technical

Announcements” or Published Fund/Institutional

PositionsPositions

� Both the filing and published information is

historic by its nature

Weighting Analysis

using “Public Data” sources

� Because there are mostly only Mutual Fund positions in

the public domain, any Weighting Analysis is immediately

flawed because it is based on only a partial and historical

picture of an Institutions true investment behaviour and

potentialpotential

� If you are comparing bespoke researched shareholder

positions on you against public filings, you are not

comparing like with like

� the peers may appear “underweight

The lack of complete information

Mutual Funds only represent (approx) 25% of investments

� Pension Funds

� Sovereign Wealth Funds

� Active and Activist Funds

� Insurance Funds� Insurance Funds

� Hedge Funds

� Prime Brokerage and Proprietary Desk positions

� Wealth Management

� Stock Lending

� Retail

FEW IF ANY “FILE” OR APPEAR IN PUBLIC DATABASES

Can your broker help with Targeting?

� Yes because they see current trading activity

� The limitation for brokers is that they do not have a complete view of which institutions are actively investing/trading

UBS – 9.0%

Goldman Sachs – 8.2%Goldman Sachs – 8.2%

Deutsche Bank – 8.1%

Citigroup – 7.9%

Credit Suisse – 7.3%

(Q4 2006 Leading Brokers, Top 5 ranked by value traded

Source - The Trade)

� The potential investors outside their field of (trading) vision have to be obtained from public information sources

End of Part 1

� Targeting

� Define your objectives

� Know your customer� Know your customer

� Prioritise the investment community

� Evaluate your targets

Part 2 – Evaluation of alternative

sources of information

Publicly available data sources

� The lack of “up to date” information

� The lack of complete information

� “Public Data” sources do not identify who makes

the investment decisions for multi-managed and

outsourced funds

The lack of

“up to date” information

US Mutual Funds - 13F Filings

� 4 snapshots in the year

� 45 days in which to file

� “Window dressing” & “Bed and Breakfasting”

Country Frequency by year

Austria 2

Belgium 2

Denmark 2

Finland 2

France 2

Germany 2

Mutual Fund public information

update frequency (Europe)

Germany 2

Greece 2

Italy 2

Netherlands 2

Norway 2

Portugal 2

South Africa 2

Spain 4

Sweden 4

Switzerland 2

United Kingdom 2

Which Non-US companies

are filed on a 13F?

� Run Date: 07/09/2007 ** List of Section 13F Securities **

� 294821 60 8 * ERICSSON L M TEL CO ADR B SEK 10

� 294821 90 8 ERICSSON L M TEL CO CALL

� 294821 95 8 ERICSSON L M TEL CO PUT

� 92857W 20 9 * VODAFONE GROUP PLC NEW SPONS ADR NEW

� 92857W 90 9 VODAFONE GROUP PLC NEW CALL

� 92857W 95 9 VODAFONE GROUP PLC NEW PUT

� 000937 10 2 * ABN AMRO HLDG NV SPONSORED ADR

� 000937 90 2 ABN AMRO HLDG NV CALL

� 000937 95 2 ABN AMRO HLDG NV PUT

The lack of complete information

Mutual Funds only represent (approx) 25% of investments

� Pension Funds

� Sovereign Wealth Funds

� Active and Activist Funds

� Insurance Funds� Insurance Funds

� Hedge Funds

� Prime Brokerage and Proprietary Desk positions

� Wealth Management

� Stock Lending

� Retail

FEW IF ANY “FILE” OR APPEAR IN PUBLIC DATABASES

The Public Data view

100%94%

31%

92%

32%40%

50%

60%

70%

80%

90%

100%Current

Previous

When comparing shareholder visibility across the sample set of 20 companies, bespoke data provided 94% coverage while public only provided 31%.

43

31% 32%

0%

10%

20%

30%

40%

Total Market Cap

Outstanding

Bespoke Public

Bespoke vs. Public Top 3 SA clients

60.00%

70.00%

80.00%

90.00%

100.00%

B es poke

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

AB S A G old F ields Nas pers A verage

B es poke

P ublic

Bespoke vs Public Data

SA Case Study | Buyers

293

130 126 119101

31

91

24

83

50

100

150

200

250

300

350U

SD (m

illio

ns)

Bespoke

Public

45

Bespoke revealed the above named investors as the five largest buyers into South Africa and in every case public information has failed to pick up the true magnitude of the share acquisition by these investors.

31 24

-2-50

0

50

NWQ

Investment

Management

Co. LLC

Franklin

Advisers, Inc.

Capital

International,

Inc.

Barclays Global

Investors NA

(California)

T. Rowe Price

Associates, Inc.

Bespoke vs. Public

SA case study clients - Sellers

-33-37

2

-11

-40

-30

-20

-10

0

10 U

SD (m

illio

ns)

-59

-50 -48 -47

-37

-70

-60

-50

D. E. Shaw &

Co., Inc.

Lazard Asset

Management

LLC

Emerging

Markets

Investors Corp.

Batterymarch

Financial

Management,

Inc.

Federated

Investment

Management

Co.

USD

(mill

ions

)

Bespoke

Public

Bespoke data reveals the above named investors as the five largest sellers of

South African stocks while public data is yet to be updated with their latest

holdings

Bespoke vs Public Data

– SA Case Study | Holders

1.8

1.2 1.2

0.80.7

1.8

0.8

1.0

0.8

1.0

1.2

1.4

1.6

1.8

2.0

USD

(bill

ions

)

Bespoke

Public

0.80.7

0.5

0.0

0.2

0.4

0.6

0.8

Paulson & Co.,

Inc.

Tradewinds

Global

Investors LLC

Blackrock

Investment

Management

(UK) Ltd.

Dodge & Cox,

Inc.

NWQ

Investment

Management

Co. LLC

USD

(bill

ions

)

Finally, How do you measure whether

you have targeted the right investors?

� Monitor subsequent trading activity

� Determine investor perceptions� Determine investor perceptions

� A constantly evolving process

as ferramentas de targeting

Investor Relations

targeting process

targeting programmestep

active investors

smaller investors

new investors

fewanchor investors

current investors

balanced shareholder