Experienced IROs know the best institutional sales reps can be a valuable source of information and a conduit to key shareholders and prospects.
Now a new survey from Institutional Investor ranks the sell-side sales teams for the first time, piggybacking on the magazine’s well-known survey that ranks sell-side research analysts.
The inaugural All-America Sales Team ranking lifts a curtain on some key issues for IROs: how important is the sell-side institutional sales force, and how can you leverage those covering your key shareholders and targets?
A quick read of the survey highlights three takeaways for IROs:
– Savvy institutional sales reps can give you insight into the investment process at your key targets
– If a sales rep specialises in your sector, stay close to him or her
– Even if the analyst has a strong buy on your stock, that’s far from the only idea a sales rep will be pushing.
Buy side sees more value
In an interview with Inside Investor Relations, Matthew Lombardo, buy-side research analyst at Victory Capital Management in Cleveland, says he’s seen an evolution over the past five years from ‘more entertainment-driven client service’ to where institutional sales reps are bringing more investment ideas and ‘trying to add a little more value.’
He has also seen ‘a step up’ by better sell-side firms offering more corporate access. ‘I like it, it means a lot to me personally,’ Lombardo says. ‘I value access to management more than I value access to sell-side research or analysts. I don’t want second-hand information.’
Lombardo prefers to ask questions of company management himself so he can put the insights ‘into my own process, which is positive for me.’ He has also has noticed the better firms are stepping up their service to middle-market clients such as Victory, and not just focusing on hedge fund clients on the coasts.
Traits of the best sales reps
Comments from survey respondents reveal that, as expected, the best sales reps know their buy-side clients’ interests and investment processes.
In announcing the rankings, Institutional Investor quotes one anonymous respondent praising a sales rep who offers ‘a unique fundamental understanding of our investment process… and therefore provides great tailor-made service – it’s all about taking the time to understand what we are looking for, and he takes that time.’
Another sales rep who specialises in the utility sector is praised for providing a timely overview of earnings summaries and calendars, even though his firm does not have an analyst covering the sector.
The top-ranked sales team at Morgan Stanley is singled out for being proactive and responsive as well as offering trading ‘colour’ for particular sectors and companies – insights any IRO would welcome.
Second-placed JPMorgan is noted for bringing its global perspective to clients as well as exposing research and insight extending beyond equities to include ‘sovereigns, corporates, high yield, foreign exchange, commodities, politics, and more’.
Michael Bossidy, who oversees research distribution in the Americas for JPMorgan, tells Institutional Investor: ‘Previewing and reviewing quarters has taken a back seat to more dynamic research.’
He says JPMorgan’s institutional sales force will bring clients information on ‘product sizing, product launches, plant developments, market developments, pricing developments, sizing of growth and margin opportunities, client surveys, market trends, product surveys, and insights into supply chains.’
[Article by Brad Allen, Inside Investor Relations]