Influence of the growing ETF industry on active investor relations work60 Influence of the ETF industry on IR work It is therefore of great relevance for IR to pay close attention to the wording and set up of the equity story IR must consider in advance which thematic ETFs the company should be included in and then choose the wording so that the desired thematic areas are included Therefore actively looking out which thematic ETFs would be relevant for the company and what the selection criteria are is another activity that will become important for IR Besides the placing of the equity story increas ing the awareness level of the company and its shares as well as increasing the transparency level are main targets IR will have to focus on in the future In addition the fulfillment of institutional proxy advisor requirements will become more and more important As proxy advisors not only advise companies on e g governance issues but mainly shareholders on how to vote at the AGM they can have a major indirect influence on the company As described above their position in the market is quite powerful This IR objective is there fore also directly related to the passive investment industry as proxy advisors advise not only active shareholders but also passive ones which mainly include ETF providers Consequently IR depart ments should regularly review the published requirements of reputable proxy advisors e g on renumeration to avoid non compliance that may result in a negative reputation for the company Nevertheless the target of achieving a fair val uation of the company will remain the highest priority as it is directly linked to the image of the company and how it is seen and perceived from the outside especially from stakeholders As a good image and reputation is essential to attract new investors and to maintain existing clients IR will continue to try to close valuation gaps in order to achieve a fair valuation Targeting and contact to passive investors Due to the rise of the passive investment industry the shares that are passively held in the company will also continue to increase This in turn has a direct impact on the shareholder structure and thus sooner or later also influences the contact to and targeting of investors The extent to which pas sive investors are targeted by IR in the future also depends on the decision of the board of directors as to whether this is part of the company s stra tegic goals and thus in line with the overall strat egy of the company Expert interview 3 2021 see annex 3 However contact with passive investors currently plays no role for IR which is mainly due to the non existent possibility of establishing con tact with ETF providers 90 of the respondents do not have contact to passive investors such as ETF providers and asset managers responsible for ETF products However half of them assume that such a contact will be important in the future ETF providers do not allow contact with firms and do not even talk to active fund managers of their own company because they do not want to have sub jective factors influencing their algorithms These created algorithms are programs that automati cally execute orders of indices and products which were ones created These algorithms should not be influenced by humans and should be rather inde pendent Since buy and sell orders are partly auto mated by algorithms and sales and purchases are dependent on certain criteria there can be a high fluctuation of orders If certain KPIs are no longer met or specific criteria no longer fulfilled invested shares are quickly withdrawn Expert interview 1 2021 see annex 3 This creates a high degree of uncertainty also for IR Unlike active investors who have consciously decided to invest in the com pany s shares and to whom a weak performance phase can be explicitly explained in 1o1 meetings IR cannot exert any influence on the investment decision of passively held shares Consequently loyalty as is often the case with private sharehold ers see chapter 3 2 2 does not exist and cannot be relied on from an IR perspective Building trust and maintaining a long term relationship to share holders on the part of IR is completely absent in the case of passive shareholders

Vorschau DIRK-Forschungsreihe Band 28: Influence of the growing ETF industry on active investor relations work Seite 60
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