tws217

Peter Lee Associates - Net Confidence Index

Fri, 01 Nov 2019 05:59:53 GMT

Peter Lee Associates’ Net Confidence Index is at the lowest level since the 4th quarter of 2012

Fri, 05 Apr 2019 12:23:57 GMT

Over 500 senior corporate executives and asset owners expect the economy to weaken further, the Peter Lee Associates’ Net Confidence Index is at the lowest level since the 4th quarter of 2012

^ Proportion of respondents expecting the economy to grow minus those expecting the economy to slow. Based on over 1100 interviews with senior business executives annually.

Peter Lee Associates' Confidence Index turns down, will the economy follow in Q2 2019?

Wed, 28 Nov 2018 01:20:54 GMT

Over 500 treasury and financial markets professionals, including direct investors signal the weakest confidence in the economy since 2014.

Business Confidence Remains Positive in H1 2018

sandhya.chand@plas.com.au (Sandhya Chand) — Wed, 22 Aug 2018 22:42:39 GMT

FX: Non-banks make headway among smaller Aussie participants

Wed, 11 Jul 2018 16:49:51 GMT

Non-bank market makers in Australian FX are not taking away many big clients from banks, but they are taking meaningful market share in smaller clients.

One of the closest observers of the Australian FX market is Cameron Peter, Managing Director of Peter Lee Associates, whose annual market survey covers corporates and financial institutions – mainly real money fund managers, insurance companies, non-price maker banks and state and territory treasury corporations – with FX volumes in excess of $100 million.

According to the survey, the leading domestic banks controlled just under two thirds (64%) of the corporate FX market last year, although their market share among financial institutions was lower at 42%. US banks accounted for more than a third (36%) of financial institution FX business in 2017.

The research showed non-banks were not winning a notable share of business at the top end of the market, says Peter, but this does not appear to be the case among smaller market participants.

Non-bank liquidity providers have been steadily strengthening their position in the traditional sell-side market during the past 12 months with the buy side and corporates ready to take on more liquidity providers as they become more sophisticated, says Michael Go, head of trading market development, Asia Pacific, at Thomson Reuters.

R5’s business development manager Adam Gazzoli suggests non-banks have grown their market share across all currency pairs and refers to growing interest in emerging markets among the larger non-banks, as they seek to capture the benefits of market electronification.

“Over the last year, we have seen an increasing number of non-banks look to bring their experience from trading G10 to emerging markets,” he says.

Advantage

When asked whether domestic banks have an appropriate share of the Aussie and New Zealand dollar markets compared with US/European banks, Gavin White, CEO of Sydney-based multi-asset brokerage and prime services provider Invast Global, observes that domestic banks still benefit from local corporate relationships and so maintain a reasonably strong advantage in the local currencies.

“Having said that, the large global banks and the fast-growing non-banks have been successful in encroaching on their turf,” he adds.

The AUD/RMB cross has been described as the ‘next big thing’ in the Australian FX market , but Peter Lee Associates research recorded no substantial increase in trading in the renminbi , which only represented 1% of the total volume traded amongst corporates and less than 1% for financial institutions.

Yet R5’s head of Asia Nick Ohlin remains confident this market will grow significantly during the next three years and observes that the Aussie dollar is still largely seen as a proxy for renminbi due to the extensive reliance on China of the Australian economy.

Thomson Reuters’ Go agrees that AUD/RMB has been a slower burn than initially expected, “but not for the want of trying from the market”.

He adds: “It is reasonable to expect that it will expand, although that seems more likely to occur in tandem with a large increase in trade finance/supply-chain RMB invoicing.”

White at Invast Global is confident that once the AUD/RMB market matures, large investment firms and asset managers will be drawn to the opportunity.

“The trade and traditional investment-related flows are there, but the speculative flows that underpin the vast markets in other pairs have not yet materialized,” he says.

Some of the Australian banks that trade on the R5 platform are demanding an AUD/INR cross, due to increasing trade flows between India and Australia, adds Ohlin.

At the end of June, the Australian Securities & Investments Commission (ASIC) called on participants in the retail OTC derivatives sector to improve their practices after a review identified a number of risks associated with the products offered , including margin FX.

Lack of transparency

Almost two thirds of the margin FX traders surveyed were unprofitable, according to the ASIC, which highlighted a lack of transparency around pricing and issuers providing wholesale services, or allowing third parties to white-label their products without adequate risk-management practices and operational capital to supervise counterparties and support their exposures.

The commission had previously expressed concern regarding high levels of leverage, although R5’s Ohlin suggests change in this area is unlikely.

“Leverage is already fairly conservative and we don’t expect there to be a great deal of change to margin requirements as it is generally agreed that the risk is being effectively managed,” he says.

White points out that leverage has not been singled out and that other factors have received attention, such as the use of client money and the stress-testing of proprietary exposures.

“I believe regulators have now addressed the issues they needed to in order to protect the interests of non-professional participants in the FX market,” he concludes.

“The next steps will likely be focused on the operational conditions within retail brokerages and, in particular, the appropriateness of the proprietary risk being taken.”

Peter Lee Associates reports its first positive Net Confidence Index in 6 years (higher GDP growth expected)…

sandhya.chand@plas.com.au (Sandhya Chand) — Fri, 20 Oct 2017 00:00:00 GMT

Net Confidence Index vs. GDP Growth

^ Proportion of respondents expecting the economy to grow minus those expecting the economy to slow.

* Confidence Index data collected as of 20 October 2017.

Based on over 1100 interviews with senior business executives annually.

GDP data (seasonally adjusted) taken from the Australian Bureau of Statistics.

Business confidence declines from a 5-year high to 2016 levels....

sandhya.chand@plas.com.au (Sandhya Chand) — Fri, 28 Jul 2017 03:22:33 GMT

Net Confidence Index Vs. GDP Growth

Proportion of respondents expecting the economy to grow minus those expecting the economy to slow. Based on over 1300 interviews with senior business executives annually. GDP data (seasonally adjusted) taken from the Australian Bureau of Statistics. na -no data collected.

Spot the difference

sandhya.chand@plas.com.au (Sandhya Chand) — Tue, 23 May 2017 06:50:37 GMT

At approximately the same time each year Peter Lee Associates undertakes its Debt Securities Investors and Australian Equity Investors research programs. Despite these clearly focusing on different asset classes our combined respondent base has some degree of crossover. And whilst, in this case, our focus was on either Fixed Income or Equities we occasionally ask the same — or similar — questions of respondents. And it always surprises us when we learn that feedback from such questioning differs markedly between asset classes — once we had finished collating both sets of results in 2016 we again found ourselves looking at two very different outcomes.

For some time we have been hearing that the way equity markets operate in the future will be more like that now operating in fixed income markets — investors are establishing in-house research capabilities and thereby reducing their reliance on research teams at broking houses; commissions are under significant downward pressure and appear headed toward zero; and other aspects of the business such as corporate access and deal flow, execution services, and account management are now seen as being much more important.

Having said that, research remains a meaningful component of the overall service provided by equity brokers — and institutions are still prepared to pay for it. In 2016, 44% of all commissions went towards paying for research product — this is down from 59% in 2010 but it continues to be the number one reason as to why an institution pays commission to their service providers.

So, for equity investors, whilst their proportional spend on research has decreased significantly, research continues to be an integral component of the service they receive from brokers. But when we do a deep dive into similar feedback from debt investors a different picture emerges.

The question asked of debt investors on this topic — “How do you reward banks for quality research and analysis in the Bond market?” — enables respondents to provide a qualitative answer, as opposed to the quantitative reply we receive from our questioning equity investors. And this is where the dichotomy emerges.

Just over 40 institutions responded to this request:

15% don’t reward banks for providing quality research;
32% would give their bank a chance to quote on more business but not provide any guarantees on winning a greater share;
31% said the bank would be top of mind as a result but wouldn’t necessarily receive any business directly attributable to research quality;
22% would ensure the bank received more business.

And the message from this? Banks can continue to produce as much good research as they like, but shouldn’t expect to be paid for it. And as post-GFC markets continue to evolve, perhaps it signals we are looking to a time when no-one produces research — debt or equity — because the providers know that the marginal value of doing so might actually be negative.

www.peterleeassociates.com.au

Sandhya Chand | Managing Director at Peter Lee Associates

#research #marketinsights #brokerresearchvalue

Confidence at a record high, with more optimists than pessimists in the Australian economy...

sandhya.chand@plas.com.au (Sandhya Chand) — Fri, 21 Apr 2017 07:33:12 GMT

Net Confidence Index vs. GDP Growth

Proportion of respondents expecting the economy to grow minus those expecting the economy to slow.

Based on over 1300 interviews with senior business executives annually.

GDP data (seasonally adjusted) taken from the Australian Bureau of Statistics.

na - no data collected.

...constrained by slower growth in China’s economy.

In Q1 of 2017, senior business executives were asked about the impact of ‘Brexit’ and the slowing growth of China to their business. Number of respondents are in brackets.

The rise of ESG

sandhya.chand@plas.com.au (Sandhya Chand) — Fri, 21 Apr 2017 07:00:44 GMT

The rise of ESG

It is a little more than 10 years since the Principles of Responsible Investment organisation was established with a Mission Statement reading - “We believe that an economically efficient, sustainable global financial system is a necessity for long-term value creation. Such a system will reward long-term, responsible investment and benefit the environment and society as a whole.”

As the recently completed 2017 Peter Lee Associates Investment Management research program shows, Responsible Investment - now better known in Australian investment circles as ESG - appears to be gaining quite a bit more traction amongst pension funds as a selection tool when looking at potential managers to run their money - and it’s not just the big boys moving in this direction either.

This increased emphasis on ESG became obvious to us when we asked fund executives how important is it that their investment managers integrate ESG in their investment process. More than half of the funds looking to award Equity Manager mandates regard such integration as very important or critical - whilst only 14% rate this factor as essentially unimportant. Although fund executives seeking Fixed Income managers do not generally rate ESG integration as highly (34%) it is still clearly a significant point of reference in their decision-making process - and has become more important over the past 5 years. Perhaps not unexpectedly, it is the Industry and Government funds who are leading the charge but when we break the data down by size of institution we are seeing funds with less than $1 billion embracing the methodology to a greater extent, than some of the larger ones - and given these are largely foundations, endowments and not-for-profits, who are more able to readily pursue impact investing, it does suggest the trend is not going away.

So how does this compare with previous years? Despite ESG having existed for just a short period of time it has been an aspect of the Investment Management landscape we have followed through our program so we do have back data.

Whilst the wording of our questions has altered over time, responses to them still provide an indication as to how ESG has increased in popularity as a factor used in determining where a mandate goes and how perceptions as to its importance have changed amongst fund executives and asset consultants. In 2009, only one-in-five asset consultants had ESG as a criteria for shortlisting managers for equity mandates — but over 60% concluded that ESG was gaining importance as an evaluation criteria irrespective of asset class. However, even by 2011 a high 34% of fund executives still ascribed little or no importance to ESG when awarding mandates.

The critical difference in the treatment of ESG in portfolios over the past decade is that while some funds continue to employ mandates with a specific ESG or SRI focus, increasingly fund executives expect investment managers to integrate ESG thinking across the entire platform of solutions.

So it appears that, as PRI enters its 11th year, ESG has finally become a benchmark of sorts for pension funds. As this trend further evolves it will be interesting to observe if it has any ramifications for those who decide not to embrace it. Only time will tell, but clearly ESG is much more than a fad and has now become well entrenched in the psyche of the local investment management industry.

Barbarians at the Gate

sandhya.chand@plas.com.au (Sandhya Chand) — Fri, 17 Mar 2017 00:00:00 GMT

Barbarians at the Gate

Having conducted Peter Lee Associates research programs for more than 25 years, we have access to much historical data and commentary which enables us to observe developing trends and potential changes occurring within an industry. After completing the 2017 Investment Management program and working through the responses we find ourselves being put on notice of a development that seems to be occurring with respect to the relationship that superannuation funds have with asset consultants.

Whether we are setting out to conduct research on an industry or just a subset of one we are always looking to receive both quantitative and qualitative feedback from respondents. Our questions are not framed in a way that encourages only a simple “Yes or No” response; in fact, they are designed to encourage respondents to elaborate on their answers. And these verbal responses form the basis of the “Verbatim” feedback we provide clients when we present our findings to them.

Whilst quantitative data provides an ability for us to show our findings in easy to understand tables or graphical presentations it is sometimes the verbal feedback that makes more of an impact on a client. A graph might show overall performance but comments suggesting that performance is slipping or needs improving, address underlying issues behind the numbers and can sometimes be more powerful way. In isolation one comment does not make much of a difference, but when the same line of thought continues to reappear - and in some cases each year - clients tend to focus on - and react to - the specific nature of an issue. And it is just such qualitative feedback from this year’s program that provided another angle to the changing relationships between funds and consultants - and had us looking back into our vaults to confirm our thoughts. How right we were!

Five years ago when we asked superannuation fund executives what was the single most important action their Investment Consultant should undertake to improve service, we generally received answers emphasising a need for more proactivity and responsiveness, less staff turnover and greater client knowledge.

Fast forward to 2017, when both the tone and demands of fund executives have changed noticeably. We still receive the staff turnover and lack of proactivity comments but more focus is now being placed on strategic imperatives, collaboration and sharing IP - such as dynamic asset allocation advice; greater look through to manager assessments and ratings processes; deeper analysis of general investment trends, market activity and developments; and improving clients’ knowledge of newer investment styles (ESG, renewables, global infrastructure).

So, while it is no surprise that the relationship between funds and consultants is changing, to remain an integral part of the investment process (asset allocation, manager hiring, due diligence, sustainability etc) consultants must step up and provide a much more customised and “unbundled” service to their clients, based on a greater focus on the needs of each fund.

Our quantitative data shows a slight tick up in the number of consultants used by each client. It might only be marginal, but more funds are now looking to add extra sources of advice and assistance - and are increasingly also turning to investment managers. This is a good indicator of the likelihood that client churn will increase and fees will remain under pressure, unless consultants provide an even more differentiated and client-driven service.

How much is good Investor Relations worth?

sandhya.chand@plas.com.au (Sandhya Chand) — Sun, 19 Feb 2017 00:00:00 GMT

With most senior executives receiving a large part of their annual remuneration in the form of long term share based incentive schemes, it would seem only sensible they do everything possible to ensure their company’s share price performs. Whilst that would suggest a focus on usual metrics such as increased sales, improvements in productivity and general efficiency, and higher profits an aspect of their business that might fall under the radar is the performance of their Investor Relations program.

As we have written previously, a good Investor Relations person is seen as someone who continually provides investors with access to management, has an excellent knowledge of the business, is both transparent and honest, and provides frequent communication. So it goes without saying that any organisation able to deliver their IR in this way has to be perceived by the investment community as being better run and more on top of their game than a corporate that doesn’t - and, therefore, a more likely candidate for them to invest in.

One of the tasks of any IR person is to keep shareholders happy and ensure they remain on the register whilst, at the same time, encourage new entrants to step up and buy their shares. All of which helps ensure the share price doesn’t suffer from selling pressure and, as long as good results keep coming, possibly heads higher as the register tightens.

But how much is an investor prepared to pay for the contributions of the IR team to the share price? And at what point do investors say that that work is now fully priced into the shares? Recent research conducted by Peter Lee Associates sought to find an answer to these questions.

Whilst most respondents (74%) suggest that IR makes no difference at all to how a company’s shares are priced by the market, 14% believe a poorly performing IR team can cause a discount and 12% take the view that good IR results in a share price premium. After eliminating those who think IR does nothing for the share price, what sort of premium or discount do the other 24% feel can be attributed to the performance of an IR team?

Interestingly enough the respondents who believe good IR does lead to a premium were split equally between one of 0 - 5% and 5 - 10% — but most of those who take the view that poor IR leads to a discount felt that that would sit somewhere between 5 - 10%.

What do we make out of this? Clearly good IR is seen as a positive as it assists the investors in understanding more about the company, its activities and its issues - poor IR would not offer such comfort and, in fact, might be seen as them trying to hide the warts and the concerns. Good IR works with the investors, holds their hands, keeps them appraised of developments. And if all those things are being delivered by the team one can only suspect that the share price more accurately reflects the success of the company being promoted by its IR people.

So you want to work in Investor Relations?

sandhya.chand@plas.com.au (Sandhya Chand) — Thu, 09 Feb 2017 00:00:00 GMT

Each year Peter Lee Associates speaks to Institutional Equity market participants in order to better understand how they view the service provided by their preferred stockbrokers. Until last year our questioning focused entirely on discovering how research analysts, sales teams, and traders were perceived by their clients - this time we also added a few new questions to our repertoire.

Before the advent of such things as the internet, electronic market services, and social media, investors were forced either to go hunting for the news themselves or use brokers to do that for them. In this way they hoped they knew everything about the companies they invested in - and those they might be thinking about adding to their portfolio. But that task is now made much easier for the investor - and, perhaps somewhat perversely, more difficult for brokers - due to the technological advances of the past 15 years.

Throughout this cycle the role of investor relations people employed by corporates and other issuing entities such as Government authorities has also undergone considerable change. In the good old days IR was a much more straightforward role - roadshows, result presentations, Annual Report preparation, and occasionally meeting with foreign institutional investors who just happened to be in town on a fact finding mission that coincided with the Rugby World Cup, the Spring Carnival or something equally as important.

But today they, too, have fallen victim to the changed technology, a more stringent regulatory framework, and investors who, generally speaking, are much more intellectually focused and more highly trained than many of their predecessors. The IR industry has had to reinvent itself as a result and it was the outcomes of that metamorphosis we were looking to use our research to delve into.

What did we discover?

That little of what might have been contained in an IR job description 15 years ago would appear in a similar document today. So what is it that distinguishes the best IR people from the rest:

an ability to provide a consistent, frequent and clear flow of information - and be both responsive and proactive in its delivery
the aptitude to develop a deep understanding and knowledge of the organisation they are promoting
the desire to work hard at delivering management access to investors across not just senior executives but also lower levels such as divisional, business and offshore unit heads

And perhaps the most important task is to, as one respondent succinctly put it - and I guess that this is not surprising as it is similar to what we consistently hear across a number of our programs - “engage with investors to find out what is important for us as investors.” And there you have it. Simple really.

What can I do for you?

sandhya.chand@plas.com.au (Sandhya Chand) — Tue, 31 Jan 2017 00:00:00 GMT

In 2016 the real estate industry found itself in the sweet spot - low and falling interest rates, a relatively weak Australian dollar, a lack of quality property, improving global economies and buckets of cash looking for a home. So is it any wonder that respondents to the Peter Lee Associates Real Estate Services research program reported paying total fees across all aspects of the industry of $512 million, an increase of almost 76% on the 2015 number. And it is worthwhile noting that 60% of those fees went to the real estate firm regarded as being the respondent’s principal provider.

Now, given the size of the fee pool and the pot of gold waiting for those deemed good enough to rate #1 with their accounts, it’s not too big a leap to expect every real estate salesperson to be out there trying even harder to further penetrate their customer base. You would expect that, wouldn’t you? But that’s not what our research shows.

It seems counter-intuitive but in 2016 business solicitation activity was only marginally higher than in 2015 and remained well below the levels of 2014. And worse still was the fact that only 1 in 3 business pitches were regarded as being effective - i.e. not a waste of the respondent’s time. Why?

Maybe the market environment in 2016 made it easy to do deals and no-one needed to push themselves. Perhaps everyone was so busy transacting they couldn’t find the time to commit to - or prepare for - pitching activity. Whatever the reason, isn’t it reasonable to assume that customers still need to know what you can do for them - and if you don’t tell them who will?

So, for those of you out there thinking about how you might be able to grow your business - and, after all, at the current time there seems to be more than enough to share around - perhaps a good place to start is by learning how to properly pitch to your clients. And if you make the effort and they come away feeling you have been worth listening to, shouldn’t you be well on the way to sharing in the spoils?

Look after your clients...

sandhya.chand@plas.com.au (Sandhya Chand) — Sun, 15 Jan 2017 00:00:00 GMT

Here at Peter Lee Associates we conduct research programs that focus on various asset classes — Equities, Fixed Income, Property, and Currencies — and across different industries — Stockbroking, Investment Banking, Real Estate, Investment Management and Commercial Banking. But, although the underlying questions will differ, a common theme runs through all programs we undertake: How can our clients better service the needs of their clients?

The advent of technology might have helped improve corporate bottom lines but in many cases it has been at the cost of a reduced customer experience. And this despite the fact that improvements in customer satisfaction levels form a part of a number of CEO’s KPI’s.

Let’s face it, customer service should not be rocket science — determine what the client wants and then deliver it to them. Not to be flippant but it’s a bit like ringing your local pizza shop and ordering a Cappriciosa and, strangely enough, finding that is exactly what’s in the box when you open it on delivery!

So whilst we come from the standpoint that says customer service should be rather straightforward we also believe that you will never get it right. Customer needs are always changing and it is the task of the customer facing people to change with them. But how does that happen?

Put simply, you need to continually listen to your clients and move forward from there. And that is what we at Peter Lee Associates seek to do. We listen to your clients and then present to you their thoughts and comments about how you interact with them. And whilst we take you through the views of your clients we also show how your competitors are faring with those exact same customers. We give you lots of numbers and data but also lots of simple, easy to understand graphics - all of which we spend time explaining in so you have no excuse for not “getting it”.

And having learned what the issues are we work with you to address those and help you to improve your customer experience — which, hopefully, means your share of both a client’s mind and, most importantly, their wallet grows.

As one of my very first employers used to say — The client is the only thing that matters in business; and if you look after them, the business looks after itself.

Keep on punching...

sandhya.chand@plas.com.au (Sandhya Chand) — Mon, 02 Jan 2017 00:00:00 GMT

We wrote recently that institutions are no longer paying as much for broker research. But, as the 2016 Peter Lee Australian Equity investors research shows, as a minimum of 40% of all commissions are generated by what are principally research driven factors (known as tags) it is an expectation that institutional broking firms continue to provide the product.

Every institution has a preferred broker list — “the panel”— with whom they deal and, for any self-respecting broker, occupying a place on a panel is the holy grail. Panels generally vary by size and structure according to the quantum of funds managed by an institution. Our research this year indicates the average number of brokers per panel has declined over the past 12 months to 13.3 (previously 14.4) — the lowest level in four years. Whilst that may sound a large number, most panels are pyramidical in structure meaning that the nearer the top of the tree you are the more commission can a broker expect to receive from an account — our research indicates that across the industry almost 50% of all commissions are paid to firms occupying the top three panel positions.

Now, before you jump to the conclusion that that leaves a further 50% of the commission pool for the other 10 firms to fight over, consider this. In 2016 65% of respondents indicated using Commission Sharing Agreements and paying 12% of their commissions in this manner. Additionally they reported paying almost 40% of their commissions via tags — that is for such services as customised research, greater analyst contact, and ESG research — with 90% of that figure being distributed across all panel brokers.

So when you do the maths it becomes apparent that for those firms on panels but outside the Top 3 positions there is not a lot left to share — and then, remember, there are also commissions being paid via tags or CSA’s to some brokers outside the panel. Whilst our analysis does not go beyond this level of granularity it does appear that about 80% of all commissions are split amongst panel members, of which 50% goes to the Top 3. We do know that the fifth most important firm receives 8% and the 10th picks up 3% so the ability to fund a full blown research product becomes more constrained as your position declines. And then you run the risk of it becoming a downward spiral — less commission, less capability to produce the research the institutions want, even less commissions…and so it goes.

So what does that potentially mean for the industry? Unless you are in the Top 3— or at the very least not lower than #5 — it becomes very difficult to see how a firm might survive in any meaningful way. And unless you are happy to rein in costs, produce less product and be prepared to live off the scraps a lower tier firm finds itself being paid, it becomes an almighty struggle.

For many years the Australian broking market has been seen as ripe for consolidation — to date that has not occurred. It is an oxymoron but, as each year passes, given its current structure, the end of the broking world as we know it keeps creeping closer to reality.

So that’s a wrap

sandhya.chand@plas.com.au (Sandhya Chand) — Tue, 13 Dec 2016 00:00:00 GMT

As we begin the rundown to Christmas and 2017 it’s perhaps appropriate to reflect on the past 12 months. A year which, in global terms, saw political upheavals of a magnitude not witnessed since, perhaps, the fall of the Berlin Wall. Brexit - who would have thought the Brits would vote to get out? And then seem to regret - and be surprised by - the outcome. Trump - a campaign that seemed hell bent on alienating every constituency in some form or other but not the one that counted - the down trodden voters. And as we look forward to the New Year there are elections to be held in France and Germany the results of which might well spell the end of the EU as we know it.

But despite such headwinds, 2016 has been a rather impressive year for Peter Lee Associates.

We completed 17 research programs in Australia and New Zealand covering such areas as Investment Banking, Equity Stockbroking, Real Estate Services, Investment Management, Implemented Consulting, Corporate Banking, Foreign Exchange & Interest Rate Derivatives, and Debt Securities
We undertook two bespoke projects on behalf of individual client organisations
Our interviewers conducted 3,587 interviews - 83% of which were face to face - with 1,783 respondents across 1192 organisations. We totaled more than 1,000 hours of interviews and met with almost 400 “C-Suite” executives.
And we are working on developing additional programs to roll out in 2017 for industries we believe will benefit enormously from having a better understanding of what their clients really think of them

And just for good measure we broke a record of sorts. For each interview undertaken we donate $50 to charity - not just a charity that Peter Lee Associates chooses but, rather, the ones nominated by each respondent. So the funds raised can go to well known organisations, to those near and dear to our interviewees or to groups that receive little airtime and therefore have minimal access to funding. This year our donations totaled just over $126,000 - our largest annual amount ever - and, in total, since 2004 we have now given $1.275 million to worthy causes such as Beyond Blue , the RSPCA , Red Cross, The Smith Family , MS Society , Oz Harvest , Royal Flying Doctor, and Ronald McDonald House to name just a few. All of which is something that a small privately owned Australian business is very proud to have done.

But none of this would have been possible without the generosity of those respondents who every year give of their time so willingly. And our clients who continue to support our research because they want to be even better at what they do. It has been a pleasure working with you all and we look forward to doing so again in 2017.

From all of us at Peter Lee Associates we wish you a very merry Christmas and a happy and safe New Year.

Our research shows…

sandhya.chand@plas.com.au (Sandhya Chand) — Wed, 30 Nov 2016 00:00:00 GMT

It used to be that to do Institutional stockbroking well it was imperative you had a quality research product, good salespeople and a team of top notch traders. And a little like the three-legged stool, if one of the three legs wobbled a bit the whole thing fell over.

Pre-GFC when the financial services world in general was much more fun, the quality of a stockbroker’s research was the main reason that a firm received a buy or sell order from an institutional client. In fact, in 2005 (before the Dark Ages) the Peter Lee Associates’ Australian Equity Investors survey showed 53% of all commissions paid were allocated to broker research — fast forward to our recently completed 2016 program and this number has now declined to 43%. To make matters worse, over the same period, average commissions paid by an institution have declined by almost 18% and the number of institutions in the market risen considerably. So, research is deemed less important whilst, at the same time, revenues are being fed from a smaller pool of dollars — and superimposed on this the number of accounts to service has increased.

The issue is that, despite this, the need to maintain a strong research product has remained intact — as has the cost of providing the service. Respondents tell us that almost 40% of all commissions paid — close to the highest level on record — are in the form of tags — the industry equivalent of a payment for services rendered. And for those tags, five of the six reasons for awarding them are research quality dependent! So, to maintain the ability to generate commissions you must have a research product that remains highly regarded. Is it any wonder that some of the more serious players have taken the axe to their once much vaunted teams despite the fact it will most likely damage their revenue line?

Can you see the stool starting to list a bit…?

Perhaps age does matter

sandhya.chand@plas.com.au (Sandhya Chand) — Mon, 14 Nov 2016 00:00:00 GMT

One of the areas Peter Lee Associates explores as part of our Real Estate Services research program, is the basis on which investors award a mandate to a particular firm.

In an earlier article, we spoke about how accounts prefer to deal with firms that have a global footprint - the access to clients that a foreign parent offers is seen as an advantage to 70% of investment executives responding to our questions, particularly those in the capital transactions and leasing areas. As one would expect, such parentage carries little weight when it comes to selecting a firm to undertake a valuation assignment or to handle property management. But that influence aside, why does an investor make the decision to go with one firm rather than another?

One impact of the GFC has been the demise of many experienced and market savvy hands. Numerous firms and industries have taken the decision to employ younger people in the business and, with the aim of reducing costs, have let some of their more experienced and serious campaigners go. In real estate, it seems that to do so, is to do so at your peril.

In our Real Estate research we focus on four business segments - Capital Transactions, Leasing, Valuations, and Property Management - and across these, ‘experience’ is the single most highly valued attribute required by investors. When we break out the top three factors for selecting a firm, experience stands out even more - amongst Property Management respondents 94% tell us it is one of their three main criteria and for Capital Transactions it is 83%. Surprisingly, fewer respondents using Valuation services rate experience highly but, even so, almost 60% still cite it as one of their top three factors.

When you lose experience, you run the risk of reducing the strength of your relationships. Respondents in Leasing (42%) and Property Management (29%) areas also cite relationship strength as one of their top three factors in selecting a firm; and Capital Transactions people place it fourth with 33% citing its importance. Only for Valuations does it seem to be less important, but perhaps that is more due to the compliance/governance matters that impact choice of provider in the sector.

So, when you next contemplate downsizing by chopping into the older members of your team it might be worth sleeping on the decision. If you lose experience and, by doing so, negatively impact on the relationship you have with your clients, you run the risk of not only cutting your cost base but also damaging your revenues - and, when you think that you are cutting costs because revenues are not strong, that is possibly not the outcome that you were hoping for.

Bigger seems to be better - again

sandhya.chand@plas.com.au (Sandhya Chand) — Thu, 27 Oct 2016 00:00:00 GMT

At Peter Lee Associates we have been conducting research programs for almost 30 years. Over that period we have witnessed first hand the impact of internationalisation on those sectors where we have a focus — in particular, Investment Banking and Institutional Stockbroking. As a result the local industry has undergone significant change and restructure, not the least in terms of the ownership of many of the previously independent partnerships — as with the UK, once revered names disappeared only to be sucked into the vortex of global behemoths.

From a client perspective the arrival of the international houses was met with much enthusiasm — access to global research, firms willing to take greater risk, the sleepy ways of old being replaced by much more dynamic firms and people — and seen as a win for the investor no matter how you looked at it.

But fast forward to 2007 and the GFC. Global powerhouses suddenly looked less compelling as they were forced to cut headcount significantly; the appetite for risk diminished in line with the strength of their balance sheets and the need to adhere to new regulations; Australia became an afterthought as a focus on larger, more profitable markets became an imperative.

So the desire of clients to be exposed to global forces ended up as a “be careful what you wish for” moment. And now, as we have previously written, the level of service provided to clients is not regarded as favorably as in previous times.

In 2014 Peter Lee Associates commenced a program covering the wholesale Real Estate Services industry — we recently completed our third iteration. This year, when choosing a real estate firm, “access to clients” is seen as one of the top three drivers behind that decision. Our feedback indicates that 70% of those executives running property portfolios view a real estate firm’s global footprint (i.e. having a global parent) as being important to their relationship.

Clients now are clearly looking to their real estate providers to have the capacity to access both capital and customers from international locations. The question that arises is whether this connectivity cannot be initiated — and managed — from an Australian domicile. After all, wasn’t that the way it was successfully handled when technology was limited to a phone and telex machine? And if that is the only benefit gained from a merger with an international firm…!

As they say in bull markets whilst the music is beginning to slow down — “it’s different this time.” It might well be but, as participants in one sector of the economy discovered almost 10 years ago, the embracing of international firms — and then relying on them to change the landscape for the better — does not always produce the outcome that you anticipated.

Boutiques are eating into the pie

sandhya.chand@plas.com.au (Sandhya Chand) — Mon, 17 Oct 2016 00:00:00 GMT

One of the findings from this year’s Peter Lee Associates Corporate Advisory research program is how few of the leading Investment Banks seem to understand the business strategies of their clients. Whilst respondents to our research are of the opinion that most of their “Advisory Relationships” have a good knowledge of the industry in which they operate — when it comes to an understanding of their business strategies the feedback is less positive.

Only one of the top 10 banks is considered to have a better comprehension of their clients’ business strategy than that of the industry; all others are viewed less favourably — and these findings are not too dissimilar to earlier programs we have conducted.

But when we look at the numbers outside the top 10 banks, the situation is markedly different with both knowledge of industry and of business strategy improving across the board. So how do we explain this?

Perhaps our “Mandate Success Ratio” provides a clue. The ratio, which is calculated by dividing the number of mandates won by number of banks’ clients awarding mandates, has declined noticeably across the top banks; for those outside the top tier the ratio has increased by 50% over this period.

Since the GFC two developments within investment banking may be responsible — large firms have downsized, with many no longer considered able to provide the level of service clients expect. Secondly, with staff departures from the top 10 banks, many senior bankers have moved to — or started — boutiques that are much more customer focused. The relationships corporates have with these firms, is more one with the individual, not the organisation.

Whichever way you read the data, it is clear that larger firms are finding their value proposition is no longer able to compete as successfully in the post-GFC environment as it was in the days pre-GFC.

It’s not just ideas that matter

sandhya.chand@plas.com.au (Sandhya Chand) — Mon, 10 Oct 2016 00:00:00 GMT

A finding from this year’s Peter Lee Associates Corporate Advisory research program is that, whilst idea generation and working hard at being proactive on behalf of your client will win you their respect, on their own these capabilities are not enough to ensure you receive the mandate.

Our research clearly shows that, when it comes to awarding an M&A mandate, it is much more important from the client’s perspective that you can successfully execute on their behalf. It is no coincidence, perhaps, that the Banks having the most success are also the ones deemed best able to deliver the whole team. In fact, our research shows that it is the same group of banks that fill the top five positions in both categories.

Whilst not being seen as amongst the best in class when it comes to execution is a negative it is not always a deal breaker. Many corporates still award mandates to firms that bring them ideas. The issue then becomes that they are more likely to use a syndicate of banks to ensure the deal gets done — the average number of “close” Advisory Relationships cited by our respondents is almost four. Yes, you will get paid for your ideas but it is more than likely you will have to share the proceeds with your competitors. Respondents told us that they pay 61% of all fees to their lead Bank whilst the balance is shared amongst the remainder of the syndicate.

tws217

Peter Lee Associates - Net Confidence Index

Peter Lee Associates’ Net Confidence Index is at the lowest level since the 4th quarter of 2012

Over 500 senior corporate executives and asset owners ​ expect the economy to weaken further, the Peter Lee Associates’ Net Confidence Index is at the lowest level since the 4th quarter of 2012​

Peter Lee Associates' Confidence Index turns down, will the economy follow in Q2 2019?

Over 500 treasury and financial markets professionals, including direct investors signal the weakest confidence in the economy since 2014.

Business Confidence Remains Positive in H1 2018

FX: Non-banks make headway among smaller Aussie participants

Advantage

Lack of transparency

Peter Lee Associates reports its first positive Net Confidence Index in 6 years (higher GDP growth expected)…

Business confidence declines from a 5-year high to 2016 levels....

Spot the difference

Confidence at a record high, with more optimists than pessimists in the Australian economy...

Net Confidence Index vs. GDP Growth

...constrained by slower growth in China’s economy.

The rise of ESG

The rise of ESG

Barbarians at the Gate

Barbarians at the Gate

How much is good Investor Relations worth?

So you want to work in Investor Relations?

What can I do for you?

Look after your clients...

Keep on punching...

So that’s a wrap

Our research shows…

Perhaps age does matter

Bigger seems to be better - again

Boutiques are eating into the pie

It’s not just ideas that matter

Over 500 senior corporate executives and asset owners expect the economy to weaken further, the Peter Lee Associates’ Net Confidence Index is at the lowest level since the 4th quarter of 2012