A close relationship with investee companies is of utmost importance to portfolio managers Jacob Schmidt Johansen and Jesper Neergaard Poll from the Danish Equities team.
“Knowing our companies well and understanding their sector and market is very important. Having many years’ experience of investing in Danish equities is a great advantage – plus our investment universe is rather small and we know the management teams on a first-name basis,” says Jacob Schmidt Johansen.
Fewer meetings with companies
That close relationship with the companies has been challenged in 2020 and 2021, as corona restrictions have severely reduced the number of physical meetings. The earnings season was largely over for Danish companies when Denmark (and most of the world) went into lockdown in March 2020. The Danish Equities team were able to meet with their companies again just before the summer holidays, but travelling has been restricted since autumn 2020 and all sorts of informal meetings have been cancelled.
When asked if he has been able to gain the same insight into companies in 2020 and so far in 2021 as he is used to, Jacob Schmidt Johansen admits it has been a challenge.
“Meeting in person means a lot to us. We are used to looking the management team in the eye; to being able to sense the atmosphere in the room and the dynamics between the CEO and the CFO. We have definitely missed that aspect of our work in the past year,” says Jacob Schmidt Johansen.
In the Danish Equities team, the reduced number of physical meetings with companies has meant more internal discussion. Although Jacob Schmidt Johansen and Jesper Neergaard Poll normally discuss numerous investment cases, they have been turning over more stones than usual.
“We have become more aware of the significance of our mutual sparring. As we have been working from home, we have also realised that we need to plan our talks. Informal, ad hoc discussions can be difficult when we are not in the same office and can’t talk together as we are used to,” says Jacob, who adds that their many years’ experience with Danish equities has proved invaluable in the past year.
Meeting experts around the world
The Emerging Markets Debt team has also been challenged by travel restrictions. Sovereign engagement is a key pillar of the team’s ESG integration process and is used intensively to stimulate a two-way information exchange with issuers, promote data transparency around ESG issues and to build long-term relationships with issuers.
“Before Covid-19, we travelled to around 20-25 countries a year, engaging with a wide array of issuer and non-issuer stakeholders in order to form a well-rounded view about the challenges and opportunities a country was facing,” says Thomas Haugaard, research analyst at Danske Bank Asset Management.
When asked how they manage to get in touch with the relevant people in so many different parts of the world, Haugaard explains that most meetings are arranged by investment banks. They typically set up a roadshow where the team meet a broad range of experts, almost nonstop, in a few jam-packed days. In many cases that would include meetings with policymakers, think tanks, state-owned companies and representatives from the private sector or some of the largest financial institutions in the country. The local IMF and World Bank teams are typically also on the meeting schedule.
Since April 2020, all meetings have been online.
“All online meetings have been arranged by the investment banks and we have been visiting just as many countries as we used to, but virtually. I have been pleasantly surprised at how most of the countries have managed to adjust to the new digital demands,” says Thomas Haugaard.
He says that although the online meetings have worked out well, he is looking forward to getting back on the road. Jacob Schmidt Johansen agrees and adds that he in fact believes the companies are also looking forward to physical meetings.
“I think the companies miss the physical interaction as well. They probably do not feel any more confident sitting at a distance, as they cannot fully discern how we are reacting to what they say. Online meetings sometimes give the impression that everything is in order and everybody agrees,” he concludes.
The statements in this article is neither investment advice nor an offer or solicitation of any offer to purchase or sell any financial instrument. Always be aware that investment involves risk and that historical performance information is not indicative of future performance or investment returns, which can be negative. Please consult with your professional advisors about the legal, tax, financial or other matters relevant to the suitability and appropriateness of an investment.