Home to the Mona Lisa, the world’s most famous painting, and breathtaking sights like the Basilica of Sacre Coeur, Notre Dame Cathedral and the Eiffel Tower, Paris is the ultimate destination for romantics and art buffs. It’s also one of the world’s largest financial centers with a large buy-side community as precious and charming as the city’s historic landmarks.
With some $600 bn in equities under management, Paris’ buy side ranks fifth in the world in terms of equity under management, according to Citigate Financial Intelligence. An impressive roster of institutional names is based here including AGF Asset Management, Axa Investment Managers Paris and Ixis Asset Management.
Paris’ investment community is mostly made up of insurance companies, banks and mutual fund firms, all of which, in the past few years, have developed a significant appetite for international stocks. In fact, Paris is the third largest European city as far as owning US equity goes, after London and Frankfurt, according to Citigate Financial Intelligence.
Paris also features a prominent sell side. Big names such as BNP Paribas, Exane and SG Cowen reside in Paris, which naturally lends coverage to large-cap companies around the globe. ‘Most French asset managers prefer to work with the French sell side to either buy or sell their shares, so it is worth scheduling one or two meetings with them while in Paris,’ says Philippe Risacher, a consultant with Citigate Financial Intelligence’s sister company, Incepta Online, in Paris.
Looking long term
As with any large and diverse financial center, it is important to research the investment community in Paris to determine which companies are best to target. ‘There is a general preference for Euro stocks because of the currency risk,’ notes Joanna Darlington, former head of European equity research with BNP Paribas and now an adviser with M:Communications, a financial communications consultancy in London. ‘But in terms of UK and US stocks, there would probably be a preference for large, liquid stocks, though there are some very specialized funds in France that would be interested in smaller UK and US firms.’
Generally, Parisian asset managers tend to be long-term investors, and most of them take a fundamental approach to investing. Hedge funds have not taken off in Paris to the same extent that they have in London and New York, and most Paris-based investors simply don’t ‘churn’ their portfolios.
Rajesh Varma, fund manager at Carmignac Gestion, a mutual fund group with Ä3 bn ($3.98 bn) under management, takes a long-term view of current and potential investments and would like management to do the same. ‘We try to look above and beyond the quarterly results, and focus on the medium and long-term outlook of a company,’ he says. ‘We do not follow indices; the idea is to invest in companies that have value but are also growth plays.’
Varma covers technology, biotech, healthcare, and oil and energy services companies worldwide. ‘What I would like from senior management, especially American management, when it comes to meet with us, is for it not to focus so much on the quarterly results but spend more time on its medium to long-term strategies,’ he points out.
Lasting relationships
Cultivating lasting relationships is the way to go when trying to raise capital in Paris. ‘A very direct hard sell approach is not effective – and don’t expect to see the results overnight,’ comments Arvind Sood, former senior vice president of investor relations and financial communications at Paris-based pharmaceutical company sanofi-aventis. During his time at the company, Sood’s IR team won the award for best investor relations during a takeover or merger at the IR Magazine Euro Awards 2004.
‘European investors in general – and French investors in particular – favor long-term business relationships,’ observes Sood, who is now vice president of IR at California-based biotech company Amgen. ‘Senior management teams should go to Paris at least once a year, and typically a day and a half is sufficient for meetings. The IRO should also follow up on his or her own by conducting additional meetings; French investors are particularly responsive to competent IROs who can speak about their business in a convincing way.’
Having your senior management present at initial meetings with investors is an absolute must in this city. ‘The big institutions have teams of buy-side analysts who very much like to meet senior management before investing,’ explains Darlington. In addition, face-to-face meetings help establish trust. ‘I want to meet management members and get an idea of their business strategy from them – I expect to be told the truth,’ comments Varma.
Senior management should split its time in Paris between meetings with current shareholders and potential ones, advises Risacher. ‘It is important to meet with your current investors once a year,’ he says. ‘You must explain your strategies to them face to face. Many investors benchmark your stock against those of your peers. Therefore, it is vital you keep marketing your shares.’
Presenting yourself
When presenting in Paris, it is important to remember investors’ preference for long-term investments. Presentations should outline the company’s business fundamentals, management strategy and the steps being taken to generate long-term growth.
‘The key issue to discuss is strategy. Questions such as, What is senior management’s strategy, How often has its strategy changed? and Do all members of senior management actually have a stake in the company? are the type of questions I ask to evaluate the company and senior management,’ states Varma. ‘I want to be able to walk out of a meeting understanding what the risks are, knowing the positives and where senior management stands.’
Parisian investors are quite keen to learn about companies in meetings, so don’t be afraid to go the extra mile in the presentation. ‘Investors in Paris are pretty reactive,’ adds Varma. ‘They don’t ask too many questions when IR and management come through. They ask significant questions only when something big hits them in the face.’
Investors in the capital are generally gracious toward visiting companies. ‘French investors are usually happy to go through the presentation, rather than going straight to questions,’ comments Laurence Borde, founder and CEO of Media Tree, a roadshow services firm in London. ‘They are very polite – they don’t tend to jostle presenters or call them by their first name as happens in New York or in the UK.’
Leave yourself an hour for each meeting: dedicate a good 30 minutes to presenting and the other 30 to the Q&A. ‘A good meeting in Paris is when you can really engage the audience – presentations serve an educational purpose for French investors, so you should encourage a dialogue with them,’ says Borde. ‘They also like the presentation to be in French if the company has a French-speaking management team.’
Getting around
It’s highly recommended that companies hire a car service to get around Paris because institutions are located in different parts of the city and Paris traffic can be a true nightmare. It’s a smart move to provide drivers with an itinerary the day before appointments. This allows them to determine the best routes to take, thus limiting your chances of getting stuck in transit while traveling from meeting to meeting.
Holding one-on-one meetings allows for more interactive dialogue. As with other companies in most big financial centers, Paris-based institutions like to hold one-on-one meetings at their offices. Lunch or cocktail group meetings are usually well attended by Paris investors, so it’s best to plan at least one of these while in town. ‘Investors there are quite used to them, and the turnout is generally very good,’ says Borde. ‘We usually get ten to 15 more people attending in Paris than we initially expected.’ Group meetings should be held at a central venue in the city.
Steer clear of Paris during Easter and August because much of the populace goes on holiday during those times. Another period to avoid is during the Paris Air Show, which takes place every other summer and makes the city more difficult to navigate.
Lastly, in true Parisian style, investors here appreciate good food and a nice bottle of wine. ‘Parisian investors are very happy to have a meal and learn about a company. You don’t waste your money when you invest in hospitality in France,’ concludes Borde
