Los Angeles – aka Sin City – is probably the only place in the world where the leader of a local high-class prostitution ring can open a casual cottonwear store and go unnoticed. When Heidi Fleiss – or Madame Hollywood – was out on bail and opened Heidi’s Wear in an LA strip mall, no one batted an eye. Perhaps it’s LA’s concentration of larger-than-life Hollywood stars that makes it easy for quasi-celebrities to slip under the radar screen. After all, this is the only city in America where political and cultural tensions are almost completely eclipsed by a grandiose cult of celebrity.
Entertaining equities
As the entertainment capital of the world, LA offers the promise of fame and suntans to plenty of young hopefuls who move here.
For IROs, a trip to LA offers a different kind of opportunity: a chance to meet with a select group of buy-side players and possibly attract a star-studded shareholder base. A handful of large institutions, namely the Capital Group, Trust Company of the West, Payden & Rygel Investment Counsel and Western Asset Management are all based here. ‘Most of these firms serve both institutional and private clients in both fixed income and equity,’ summarizes Jim Lyon, vice president of Oakwood Capital Management.
The Capital Group is undeniably the biggest institution in town in terms of both equities and fixed income, says Lyon. Based in downtown Los Angeles, the Capital Group operates two main divisions: Capital Research and Management which looks after over $325 bn in assets for the American Funds family of mutual funds, and Capital Group International, which manages over $190 bn in institutional assets. The firm also runs a private investment arm with around $6.6 bn under management.
‘Trust Company of the West is another important institution located downtown,’ reports David Olson, senior vice president of investor relations at Healthnet. With over $80 bn in assets under management at Trust Company of the West, Olson’s assessment proves right. Pasadena-based Western Asset Management is another good target with over $82.7 bn in assets under management. Payden & Rygel Investment Counsel, managing over $37 bn in assets, is another venerable LA institution with offices downtown. ‘They are predominately bond managers but they do have an equity business that includes a small-cap product,’ says Oakwood Capital’s Lyon.
Within LA’s city walls, there are a number of small to mid-sized buy-side firms worth investigating. According to Olson, many of the smaller money managers focus on the entertainment industry and are located in LA’s West Side and Century City areas. In terms of investment style, ‘There is a mixture of both Garp [growth at a reasonable price] investors and value players among the smaller firms,’ says Dan Saks, vice president of corporate affairs at Taro Pharmaceuticals.
Boutique style
Among the smaller LA-based firms, Oakwood manages about $325 mn and follows a blend of value and growth styles. ‘We have a staff of five investment professionals who do most of their own research and have access to Street research as well,’ reports Lyon. George Bjurman & Associates is another small local buy-side firm with a strong reputation, recommends Lyon.
‘Outside of downtown LA, there is a profusion of smaller money managers spread out around Southern California,’ says Healthnet’s Olson. These firms’ investment styles are as diverse as their locations. ‘We have both quantitative and qualitative managers throughout the region,’ notes Taro’s Saks. In San Diego, Nicholas-Applegate Capital Management, a subsidiary of German insurance giant Allianz, is a well regarded firm with around $37 bn under management in fixed income and equities. Roxbury Capital management, a high growth stock investment firm, is located just south of LA in Santa Monica. And Dimensional Fund Advisors, a firm reputed for its academic approach to investing, is also based in this sea-side suburb.
According to Saks, it’s more complicated to pinpoint important targets among the smaller LA-based money managers. ‘The difficulty is that the firms follow such diverse and specialized styles,’ he explains.
With the larger institutions, the challenge is finding out the name of the analyst who covers a particular industry. Healthnet’s Olson suggests enlisting the help of a local IR firm that knows the investment community inside out. ‘The best way to identify and initiate contact with local money managers and analysts is to do a screening list through a local vendor,’ Olson says.
Buy-side town
‘LA’s investment community is pretty much dominated by buy-side firms,’ adds Oakwood Capital’s Lyon. ‘There are a couple of entertainment analysts out here but most of the sell side is on the east coast,’ echoes Healthnet’s Olson.
According to this local IRO, most LA-based companies travel to New York and Boston to meet with sell-side analysts. Fidelity Investments is one of the few large firms with a strong presence in the city. A number of east coast firms, like Credit Suisse First Boston, do have a small group of analysts based in LA to cover specific industries like defense, entertainment, energy and technology. And there is also a handful of regional sell-side firms including Crowell Weedon & Co, Webb Bush Morgan and Gerard Clower.
Despite its small size, LA’s sell-side community is ‘extremely approachable’ when it comes to setting up meetings with visiting companies, suggests Doug Christopher, director of research for Crowell Weedon & Co. With $6 bn under management, Crowell Weedon & Co serves individual investors and has eight offices in southern California. The firm recently discontinued its investment banking arm and now specializes in research. There are four analysts working in Crowell Weedon & Co’s downtown LA office. ‘We are four generalists, meaning we follow several types of companies with a focus on high-quality large caps,’ explains Christopher.
According to him, Los Angeles-based analysts and portfolio managers are eager to meet with companies traveling through Tinseltown. Oakwood Capital’s Lyon outs it a little more directly: ‘Los Angeles needs to see companies.’
That’s because in recent years the number of visiting companies has dropped dramatically. Ten years ago, The Los Angeles Society of Financial Analysts (LASFA) hosted a couple of luncheons a week where companies would present their stories. ‘We now host about two or three a year,’ says Lyon, who serves as vice president of the LASFA. ‘A lot of companies now do research into who their major shareholders are and then skip meetings with the society,’ adds Lyon. This is a missed opportunity, he says, because through the society companies can reach a lot of small to medium-sized money managers who cannot be found using traditional research methods.
As a way of encouraging more companies to present, the LASFA is entertaining the idea of subsidizing some or all of the expense of luncheons that used to be paid for by visiting companies. The LASFA has around 1,400 members, the majority buy-side analysts and portfolio managers. Depending on the presenter, attendance at LASFA luncheons ranges between 20 to 150 members. The criteria for those who wish to present is wide open. As Lyon says, ‘Any company interested in telling their story to the LA investment community should feel free to contact our society.’ (see sidebar, Visitor information)
Navigating LA
The main challenge in setting up meetings in Los Angeles is geographical. ‘This is a hard city to visit because everything is so scattered,’ alleges Lyon. Figuring out where investors reside amid LA’s apotheosis of urban sprawl definitely requires some lead time. Most of the big institutions are concentrated in the city’s downtown core while the smaller firms are scattered around southern California. Time management is key because it can take up to two hours to drive across town in the middle of the day in LA.
Some say it takes two days for a proper tour of the Los Angeles investment community. For those who are short on time, Oakwood Capital’s Lyon suggests hitting three main geographical targets: ‘Downtown is first because that’s where all the big money managers are; the west side is second in terms of the number of firms; and Pasadena is third.’ Healthnet’s Olson estimates it would take a half day to attend meetings in key spots along the waterfront including downtown LA, the west side and Century City areas. For those who have more time, it’s possible to spend a second day visiting money managers outside LA. ‘Important geographical targets include Beverly Hills, Westwood and Santa Monica,’ says Lyon.
Since travel time is such a consideration, most portfolio managers expect companies to visit their offices. As a general rule, IROs should set up a series of one-on-one meetings in different places in and around Los Angeles, advises Saks at Taro Pharmaceuticals. ‘Doing one-on-ones is a much more efficient use of your time and it’s much easier than trying to cobble together a group meeting in this town,’ echoes Olson.
The alternative is to set up a series of small group meetings in different parts of town. According to Lyon, lunch meetings are preferable for analysts and portfolio managers. Breakfast meetings don’t work well in LA because of the three-hour time difference with the East Coast. ‘By the time you get out of a breakfast meeting, the markets are already open and you still have to commute back to the office,’ explains Lyon. West coast analysts and money managers have a different schedule than their colleagues in the east. They arrive at the office around 4.30 am to review research; they then begin their trading session, which winds up shortly after noon Pacific time. So in order to maximize attendance, the most appropriate time for a lunch meeting is shortly after one o’clock.
Despite LA’s reputation as a playground for silicone-infused beauties and Hollywood film executives, the city’s investment community is surprisingly down-to-earth. When meeting with local investors and analysts, it’s best to keep the presentation simple and avoid relying on glitzy props like videos to tell a company’s story. ‘Stay away from really flashy presentations and don’t tell us about another great new product,’ says Crowell Weedon & Co’s Christopher. ‘Show us your strategy and provide a level of detail that allows analysts to build a model around your company’s story,’ he adds.
Media relations
Over the last few years, LA’s business landscape has changed considerably. ‘There is not a single Fortune 500 company located in downtown LA right now,’ says Healthnet’s Olson. A lot of smaller media, entertainment, healthcare and technology companies are still headquartered in downtown Los Angeles but all the big corporations have moved to surrounding areas. As a result, there are not a lot of financial media outlets to choose from here.
The city’s daily newspaper, the Los Angeles Times, has a small staff of business reporters covering both local and national stories.
At the Times there is strong interest in stories with ties to local industries like technology, media, financial services and defense. ‘It’s a very well-respected paper – current Wall Street Journal managing editor Paul Steiger began his career as a business reporter at the Los Angeles Times,’ notes Olson. The Journal has a local LA bureau that focuses on entertainment and defense industries. ‘So if your company fits in one of these industries, you might want to target a Wall Street Journal journalist to set up a background meeting while you’re in town,’ Olson suggests.
Los Angeles’s geographical challenges should not deter IROs from planning a visit. After all, local IROs have learned to deal with the added tensions caused by long travel times, jam-packed freeways and a splintered investment community. The key here is to plan carefully and allow enough time between destinations. Penetrating the Los Angeles investment community requires a lot of research as well as a serious time commitment from senior management. But with its strong set of large buy-side institutions and plethora of small to mid-sized money managers, this West Coast financial center offers some real possibilities.
Visitor information
Where to present
California Club
538 South Flower Street
Tel: +1 213 622 1391
Jonathan Club
545 South Figueroa Street
Tel: +1 213 624 0881
Westin Bonaventure
Hotel Los Angeles
404 South Figueroa Street
Tel: +1 213 624 1000
Biltmore Hotel
506 South Grand Avenue
Tel: +1 213 624 1011
Los Angeles Society of Financial Analysts
900 Wilshire Boulevard
Suite 1434
Tel: +1 213 627 0634
www.lasfa.org
Contact: Jodi True at [email protected]
Where to stay
Los Angeles
Downtown Marriott
333 South Figueroa Street
Tel: +1 213 617 1133
Four Seasons
300 South Doheny Drive
Tel: +1 310 273 2222
Los Angeles Wilshire Grand Hotel & Center
930 Wilshire Boulevard
Tel: +1 213 688 7777
Omni Los Angeles Hotel & Center
251 South Olive Street
Tel: +1 213 617 3300
Where to eat
John O’Groats
10516 West Pico Boulevard
Tel: +1 310 204 0692
Alto Palato
755 N La Cienega Boulevard
Tel: +1 310 657 9271
Hamakawa
209 S Central Avenue
Tel: +1 213 625 8125
Washington Street Bar and Grill
3016 Washington Bl.
Marina Del Rey
Tel: +1 310 823 9898
Tel: +1 310 823 1486
Sell-side firms
Crowell Weedon & Co
Webb Bush Morgan
Gerard Clower
Major buy-side firms
The Capital Group
Trust Company of the West
Payden & Rygel Investment Counsel
Western Asset Management
Salomon Smith Barney
ING Capital Advisors
Smaller buy-side firms
Los Angeles
Reed Conner & Birdwell
Oakwood Capital Management
George Bjurman & Associates
San Diego
Nicholas-Applegate Capital Management
Santa Monica
Roxbury Capital management
Dimensional Fund Advisors
