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British executives and politicians have been wondering how to make the London market look more American after years of tepid returns. They should remember that the US does not just dominate the world’s stock markets, it also dominates the world’s stock of investors. One way to attract them is for UK companies to bridge the language gap with their US peers.
The UK investment management industry had £9.1tn of assets under management at the end of 2023, according to the Investment Association. US asset manager BlackRock alone had almost £8tn, at contemporary exchange rates. Different sources give different estimates, but Lex analysis of Bloomberg data shows median US ownership of a FTSE 100 company is double the UK ownership.
Yet many companies still act as if the marginal buyer they are trying to attract is an old-school domestic stock picker. Research by UBS found that although the most important driver of valuations are factors such as return on capital, improving communication can still have an impact.
After the listed real estate industry descended on Florida for Citi’s global property CEO conference in March, for example, several UK executives complained that they were struggling to catch the attention of investors. But the average quarterly update of a London-listed real estate investment trust would be baffling to many American fund managers.
The most recent trading update from Segro, the UK’s largest real estate investment trust, didn’t include any data on revenue or profits. That may have been fine when the target audience was local specialists who had to pick one of Segro or British Land; but investors now could be choosing between Segro and America’s Prologis or France’s Unibail, which provide far more information. Why would they put in extra work to understand relatively small companies that won’t move the needle in a portfolio?
Some companies are trying to adjust. Schroders recently switched from providing brief updates on assets under management in the first and third quarters to publishing a longer note including commentary from executives, as part of its new management team’s efforts to broaden its shareholder base.
A burgeoning shift towards the share buybacks beloved of US investors is another manifestation of the same trend. British firms have traditionally favoured dividends, but sometimes executives need to meet investors where they are, rather than where they wish they were.
All this said, brevity is a virtue. US quarterly disclosures can run to the hundreds of pages. Executives who chafe under the weight of those updates may scoff at the idea of encouraging more communication, but there is plenty of space to improve outreach in the UK before hitting a point of excess.
There is no magical way to transform an old-world economy into Silicon Valley but there are more mundane ways to draw in US investors. Making sure everyone is speaking the same language is a good place to start.
