Boston is famous for its prominent role in US history, its elite universities and its Red Sox – the team that won last year’s baseball World Series. But this historic US city also has one of the oldest and largest financial centers in the country, which can be found in the downtown area of the city near Faneuil Hall, the legendary meeting place otherwise referred to as the ‘cradle of liberty’.
Boston is home to some of the world’s biggest institutions, such as Fidelity, State Street Global Advisors and Wellington Management. The city’s buy-side investors manage a whopping $1.98 tn in equity assets, making it the second largest city in the US in terms of total equities under management, according to Citigate Financial Intelligence. Alongside those big names, there are around 400 buy-side institutions, approximately 30 sell-side firms and more than 1,700 portfolio managers based in Boston.
As such, it is common practice for IROs worldwide, when planning their US roadshows, to have New York at the top of their target list and Boston following a close second. ‘Boston is certainly one of the major financial hubs in the US and it is a must-visit on anyone’s buy-side schedule in terms of one-on-ones,’ notes Richard Yerganian, vice president of investor relations at LTX Corporation and president of the Boston chapter of the National Investor Relations Institute (Niri). ‘If you really want to do a complete job and maximize your time here, having your senior management in Boston for a day and a half is probably enough.’
Boston’s investment community is also quite diverse. Companies are certain to find investors interested in their sector, market cap and investment story, even if their business is not very well known. ‘There is just about every type of fund you can think of here in Boston,’ says Joshua Young, director of investor relations and corporate communications for Aspen Technology, and communications chair at the local Niri chapter. ‘Whether it is a turnaround fund, small-cap fund, mid-cap fund or large-cap fund, there is a great mix of money managers in the area.’
Global focus
Because of its considerable size and diversity, it is vital to research the Boston investment community to find the right audience for your story. ‘You’ve got investors in Boston ranging from those looking for performing companies and looking at results from quarter to quarter, to those that are real value investors and open to turnaround stories,’ explains Young. Therefore, he adds, it is vital to understand investors’ strategies before even picking up the phone to arrange meetings.
More often than not, Bostonian investors will be already familiar with your company, business and product – and, in many cases, those of your competitors – on a worldwide scale. ‘We tend to look at industries on a global template as opposed to just US and international, so a lot of our analysts tend to cover industries on a global basis,’ points out Shigeki Makino, portfolio manager with Putnam Investments.
At the big firms, the investing culture tends to be collaborative and team-oriented, so portfolio managers rely heavily on analysts – and other colleagues covering different regions and sectors – to learn about investment opportunities. ‘We have some 40-odd analysts who work at Putnam and support the investment effort,’ explains Makino. ‘In addition, we have a host of fund managers who tend to specialize regionally: in the US we have a couple who focus on Asia, a couple who focus on Europe, and some who focus on emerging markets. So there is a set of different teams that work on different products and we tend to be collaborative and share ideas across these products.’
With this level of knowledge at their fingertips, Boston’s investors tend to focus their questions on the qualitative aspects of the company. ‘The time spent with the management team is intended to get a feel for the quality of the management team, the strategy of the company, the competitive positioning, and what the company’s various opinions are on the business outlook. Those are the most important categories to focus on,’ says Yerganian.
Makino agrees: ‘At a meeting we are trying to understand the long-term outlook for the company in terms of its economic model, its sustainable growth rate, the capital intensity of the business, and potential returns. Senior management should be able to talk cogently about that and about how it allocates its capital at that first meeting with us.’
While Bostonian investors are friendly and open to hearing a company’s story, keeping your presentation straight-to-the-point and honest is a must. ‘Eliminate as much spin as possible – people can work through a lot of it, but it seriously works against you over the long haul,’ Makino points out. ‘I’m more interested in knowing the bad news than in hearing that all things are going well and as expected. It is important for companies to know they need to get out and communicate when things aren’t going terribly well, as opposed to just when things are going wonderfully for them.’
It is also important to schedule enough time for a Q&A session, as the sudden unavailability of time to answer key questions is the pet peeve of many investors. As is the case in most big financial centers, one-on-one meetings with senior management are preferred in Boston, especially because portfolio mangers like to ask questions that only senior management can usually answer – such as, ‘How do you manage your excess capital?’
No sell side allowed
What is unique about Boston’s investment community is that most of the big name companies do not allow sell-side analysts and brokers to join in meetings. That’s because firms in this town encourage investors to contact them directly – so don’t be afraid to avoid the middleman and arrange meetings yourself.
‘Over the last couple of years the biggest change has been the evolution of the relationship of the sell side and the buy side with the companies,’ says Makino. ‘For the most part this relationship still consists of a broker saying to one of our analysts, So-and-so company is coming to town, would you like to see it? And then we say yea or nay and the broker goes ahead and sets up a meeting. I’d like to change that – it would be much better to have a two-person relationship as opposed to three. And we have started to sow the seeds to encourage this kind of relationship to go forward.’
Holding one-on-one meetings directly at the institutions is the way to go, because most of these investors attend several meetings in a day and find it hard to make it to meetings outside their offices. ‘And there are at least 15 institutions that might merit a one-on-one meeting in Boston, depending on how involved you have already been with them,’ points out John McInerney, senior director of Citigate Financial Intelligence.
It is still worth holding a group lunch meeting with the smaller companies to maximize senior management’s time. For most companies, says McInerney, a luncheon presentation will be attended by an average of 15 people. This is small by New York standards, but the quality of the attending institutions is very high. If your company is giving a luncheon presentation, you’ll get the best attendance by having your CEO or CFO there. Keep in mind that, unlike New York, Boston is not a city for dinners with investors.
Getting around
Boston’s Logan airport is only a couple of miles from the city, and a 15-minute cab ride to the downtown/financial area. But traffic can be unpredictable in Boston, so allow at least 30 minutes to get from the airport to your first meeting.
Although Boston is a small city, it can be confusing to navigate. Locals advise renting a car service to ensure you make it to meetings on time. This will also preclude having to make senior management walk through snow and rain if visiting during the winter months.
On the other hand, if you are familiar with Boston and the weather is in your favor, walking from meeting to meeting is feasible. Most institutions are located within 10-15 minutes walk from each other in the downtown area of Boston (off the South Station of the subway line).
There isn’t an ideal time of the year to go to Boston but, as with most US cities, the investing community tends to take vacation in the last week of August – so you might want to avoid this period. On the other hand, if you do score meetings during this time you will probably get quite a bit of attention.
Schedule meetings for a 60-minute running time – and make sure you keep to your schedule, as Bostonians are keen to have meetings start and end on time. They do, however, understand about delays during the winter months, when the snowy weather can cause delays on the road network, as well as other transportation means.
Finally, Boston is known for being a conservative town, so make sure you dress accordingly. As McInerney advises: ‘You don’t want appearance to create an inadvertent barrier – wear a suit and you can’t go wrong.’
