Fund managers have had to conduct company management meetings remotely over the past year. To what extent will they revert to old practices as normal life re-emerges?
- Zoom has had its upside for fund managers, allowing them to see more companies.
- However, they have also found that it is a imperfect tool for making ‘softer’ judgements on management teams
- A new hybrid approach is likely to emerge
During the pandemic, fund managers have had to adapt to make investment decisions over Zoom (or their teleconferencing facility of choice). For many, this has proved a less-than-perfect substitute, making softer judgements around integrity and ambition more difficult. As the world starts, slowly, to return to normal, will fund managers return to meeting companies face to face?
Zoom has had its upside for fund managers. Without the need to travel, they have generally been able to see more companies. Plus, they have often been able to meet senior executives one-on-one rather than as part of a wider conference calls. This means they can ask more detailed and specific questions.
Equally, it has allowed them to shore up their ESG credentials. It is difficult to make a point on sustainability when your fund managers are flying all over the world to meet companies. For the time being, it has been a neat way to reduce their carbon footprint.
However, in common with many other professions, many have found that Zoom calls lack nuance. It is difficult to ‘chew the fat’, which might help fund managers pick up differentiated insights. They also can’t walk the floor, meeting line managers and workers, who may give a truer picture of the activity and energy within a company. Equally, fund groups haven’t been able to use their network in the same way. They can’t go to conferences and share ideas.
This may not matter very much at the margin, particularly if a fund manager is focused on large cap companies where all the information is likely to be in the price. However, for smaller company fund managers, it is a key point of differentiation. Good fund managers have spent years honing their skills in recognising good and bad management, while also cultivating relationships with management teams. The lifting of restrictions may once again allow them to claim their advantage.
For the companies themselves, the new regime has worked well, allowing them to travel less. It may be that they are not keen to revert to the old approach of seeing fund managers in person. Equally, the ESG considerations remain. Fund managers aren’t likely to start flying round the world to see companies except when it’s completely necessary.
Fund managers will start to see companies face-to-face once more, but are likely to be far more targeted in their approach. They may meet management only for new investments, or they may deploy more on-the-ground analysts. A hybrid of new and old ways of working is likely to emerge.
