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At a glance Time to talk Hot topics Targeting tips |
Spain offers a good example of why politicians don’t influence the economy as much as they like to make out. The country had no working government for 10 months last year and, during that period, saw economic growth pick up and unemployment fall.
Indeed, Europe as a whole offers a similar lesson. In the 12 months since the last IR Magazine Think Tank – Euro Leaders, the region has faced a series of political shocks. The UK voted to leave the European Union, the US voted Donald Trump in as president and, more recently, UK Prime Minister Theresa May threw away her parliamentary majority. Over the same period, regional economies have grown in strength while stock markets have sailed to all-time highs.
Today, we are in the ‘age of caution’ – and that’s no bad thing, explained one speaker at the think tank, which takes place under the Chatham House Rule to encourage candid discussion. He compared economic performance today to the British long-distance runner Mo Farah: slow and steady. Europe will become increasingly attractive to investors, the speaker continued, with the dominant position of Emmanuel Macron in France offering the possibility of genuine reform in both his country and the wider eurozone.
But not all topics offered such a rosy picture. Attendees considered the rise of passive investing, which is predicted to account for more than 50 percent of the US equity market within the next five years. While passive funds have not yet made the same inroads in Europe as they have in North America, their presence is growing – a fact corroborated by several IROs present who have witnessed big shifts in their shareholder base.
Notably, the spread of passive investing has put more space between European issuers and their owners: most passive assets are managed in the US by the likes of BlackRock and Vanguard so the overall success of the strategy has led to a big uptick in US ownership of European stocks.
How should companies respond? IROs need a more focused approach to targeting, said one speaker, to avoid wasting time on ‘IR-immune’ funds. They should also investigate the criteria behind different index funds to build up a picture of what’s driving trading. It’s important to understand what’s going on, even if your influence is limited.
This article appeared in the fall 2017 issue of IR Magazine
