The broader impact on financial services of one current theme – Brexit – is also a concern from an IR perspective for Walsh. He feels that the highest level of engagement with investors, both at a macro- and micro-economic level, must be sustained, as IR necessarily builds an understanding of, and answers to their needs, in the context of Brexit uncertainty. “The real challenge here is the amount of time that businesses will need to devote to IR,” he comments.
With finite IR resources, finding a balance between time spent with the banks, the desk analysts, the ratings agencies and the investors, is difficult. “There is no perfect answer to this,” he says. “For us, it is about having a mix of regular, more structured touch points, and overlaying that with an ‘as required’ basis, depending on the investor. It cannot be a fixed approach, it has to evolve.”
Of course, when a business is performing well, then debt IR can be relatively easy. However, if a business is facing a challenge, financial (such as a rating downgrade) or even physical (extreme weather, for example) issues will see investors lining up for clarity. IR must be ready with answers. “That’s when you really get to see if you are doing a good job,” says Woltring.
The importance of getting it right should not be underestimated; access to capital markets may depend on it. “You’re only as good as your last deal,” she warns. “It’s vital to be proactive. Even if you feel it’s not needed now, it’s important to know who your investors are, and to engage with them, because they are key stakeholders.”
Although time and effort is required for good debt IR, the success of that effort is hard to gauge, especially as investments are, to a degree, subject to market behaviours. As we have seen, IR earns its keep when the company is facing a challenge. But a recent survey by the US National Investor Relations Institute offers a loose quantification of that value, at least on the equity side.
It concluded that 82% of US buy-side investors believe that IR impacts a company’s valuation. It said that good investor relations provided a 10% valuation upside, but poor investor relations had a negative impact on a company’s valuation by up to 15%. This may well translate into the debt IR realm; the only certainty is that effective debt IR demands that the function stays wide awake.
To this end, technology is playing an increasing role in ensuring a positive outcome. “Digitisation in IR is here and will continue to evolve,” notes Walsh. In terms of engagement, just a few years ago, conference calls and face-to-face meetings were the extent of interaction, he recalls. Now it includes options such as webinars and social media platforms. “Technology will serve to increase the speed and frequency of touch points; there will be a greater expectation of how many times IR will engage with investors and other stakeholders.”
There is, he adds, also now the question of how technology will be involved in investor decision-making. The current use of financial statements and business models is slowly being augmented with AI-type technology, enabling greater insight drawn from many more sources. Taken to the extreme, it may even be worth positing that, one day, IR will, on the investor side, be dealing with algorithms rather than human investors.
Until that day, it remains a very human function, and humans can sometimes be led by stories in the press, locking-on to certain themes to the detriment of the conversation. “It is our job to ensure they get the right story,” states Woltring.
As such, there are certain skills required for the good IR practitioner. These must reflect a mix of technical and soft skills, the latter particularly around communication and human interaction. “You need to be a rounded individual to be able to hold conversations with investors and to drive the desired outcomes,” says Walsh.
For anyone considering a move into debt IR, Perry says there is no set route, agreeing with Walsh that a rounded skill-set is essential. “You need the strong technical element and you need a deep understanding of the business. But investors can be quite challenging in their questioning, so you also need to be an effective listener if you are going to be able to answer their questions fully rather than resorting to stock answers.”
It is, naturally, incumbent upon investors to ask the right questions too, and in mixing with both equity and debt investors, Woltring notes that equity participants tend to probe a lot deeper, seeking quite detailed analysis. Debt investors, conversely, tend to be “a bit lighter” on some of the detail, even if many do take the time to prepare in the face of short timeframes and an abundance of complex information.
Of course, adds Walsh, as debt IR experts, “it is easy when holding all the information to know what questions should be asked”. As such, he feels that it is the lot of debt IR professionals to be sympathetic towards investors. In the digital age, as more information becomes available, so more information is expected; debt IR teams must be ready for anything.