Greenwich Report Warns: Don’t Ignore Hedge Funds

Jan 28 2008 | 11:14am ET

U.S. companies should be adjusting their investor relations strategies to cater to the growing influence of hedge funds, according to new research from Greenwich Associates. 

Hedge funds already account for close to half of the trading volume on the New York Stock Exchange by some estimates, and research from Greenwich suggests they will continue to expand their presence in global financial markets.

The research firm also revealed an important finding that might come as a surprise to corporate investor relations professionals: U.S. institutional investors paid Wall Street nearly $1.75 billion last year in equity brokerage commissions specifically designated to compensate brokers for coordinating and facilitating face-to-face meetings between the institutions and corporate management teams at private gatherings or industry conferences.

While that figure represents about 35% of total U.S. institutional commission payments, hedge funds use about 42% of their commissions to compensate brokers for delivering meetings with company management teams.

“Corporate IR professionals should be intimately familiar with what the booming business brokers have built selling access to company management teams,” said Greenwich Associates consultant Bill Bruno. “More specifically, IR professionals should be aware that the time of their top executives is a valuable asset that companies should be managing strategically and for their own benefit.”

The typical hedge fund analyst covers fewer industry groups (4.2 in 2007) than the average among buy-side analysts as a whole (5.1). However, hedge fund analysts cover 60% more companies than their Wall St. peers across the buy side, a whopping 87 companies on average in 2007—up from 75 the prior year—versus just 54 for the buy side as whole, according to the report.

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