NEW YORK--(BUSINESS WIRE)--Commodore Intelligence, a firm empowering European corporates, bankers, financial intermediaries and corporate access teams with actionable intelligence on U.S. investors, today released a survey confirming European equities are likely to become the principal beneficiary of the ongoing investor retreat from emerging markets. In particular, in an ongoing hunt for alpha, U.S. Global Equity portfolio managers are increasingly focused on European companies with non-U.S. revenue streams and exposure to emerging and frontier market entry.
Beth Saunders, Founder of Commodore Intelligence, commented, “European equities are becoming more interesting to U.S. investors looking for globally diversified companies trading at lower valuations than their U.S. counterparts. Investors surveyed say these investments provide their portfolio exposure to long-term growth in the developed world from leaders that have a storied history of managing local cultures well.”
Currently, U.S. investors manage $1.57 trillion in developed market equity funds, with more than $190 million flowing into these funds through the third quarter 2015. Conversely, emerging economies during this period have experienced $540 billion in net outflows compared with $32 billion of inflows for the same period in 2014, driven by significant deterioration in the outlook for many key emerging economies like Brazil and China.
A new survey by Commodore Intelligence has found that these redemptions won’t sit on the sidelines for long. The intelligence firm interviewed 200 portfolio managers managing more than $100 billion in combined holdings of European equities. The majority of investors – seventy-five percent of those surveyed – are prepared to deploy this cash into companies that have diversified revenues or operations globally. Contrary to popular belief, however, exposure to the United States is not expected to play a significant role in these investments, with less than 10 percent of those surveyed requiring their holdings to have operations or revenues in the United States. Other top-line results of the survey noted:
- U.S. investors confirmed they are on a quest for stocks that fit into their traditional investment style of “balanced growth.”
- Seventy-eight percent of those interviewed cited balance sheet strength as equally important when making an investment decision as a company’s strategy and growth targets.
- Despite the importance of their portfolio companies still being in an investment mode (only thirty-two percent place a premium on share buybacks and dividends), U.S. investors favor a conservative investment approach that does not sacrifice profitability.
- Ninety percent of investors consider profitability “very important” or “somewhat important” to their investment decision.
- Fifty-one percent of the portfolio managers surveyed generate investment ideas from internal teams, while forty percent primarily use internal teams with occasional inputs from U.S. and European sell-side firms.
- Less than one percent currently use U.S. corporate brokers for information or access.
Tapping into this potential new pool of investors may pose unique obstacles for European CEOs accustomed to relying on in-country corporate access and sell-side teams to manage meetings with potential investors. In the post Sarbanes-Oxley world, U.S. firms have invested billions in internal research units rather than paying external firms for intelligence and access.
Saunders concluded, “European CEOs should be ready to add quarterly meetings with U.S. investors to their already very crowded diaries if they want to meaningfully access U.S. investor capital. With less than seventeen percent of U.S. buy-side investors citing sell-side conferences as their preferred way to meet investors, and seventy percent saying they need to meet with European management teams two-to-four times prior to making an investment in the company, it’s clear that CEOs have a lot of work ahead of them to attract this new pool of capital.”
About Commodore Intelligence
Commodore Intelligence empowers European companies with actionable intelligence to target and impact the best fit U.S. institutional investors for their stock. Commodore’s platform provides companies with access to the qualitative and quantitative factors investment managers utilize when making an investment in a European equity. Using this information, European issuers can better frame an investment story and leverage senior management’s time in investor relations activities.