Tips for Investor Targeting

IR Magazine, an international publication dedicated to the investor relations ecosystem, published a guide at the end of the year on how to find the best investors, and MZ, who is committed to always empowering IR professionals with investors, highlights the main information provided in this guide, in addition to including additional points that we believe are important.

New Investors

One of the biggest challenges for IR professionals is attracting new investors, and one of the strategies available is to map investor targets to build a robust shareholder base according to the company’s objectives. Identifying investor targets allows companies to attract the ones who are aligned with their objectives and that are more familiarized with their sectors. Additionally, this allows the company to build a diverse investor base and establish strong relationships that bring long-term benefits.

Receiving consistent support from investors who are well-aligned and have a long-term perspective can reduce the volatility from market fluctuations. Furthermore, investors that are well-aligned have more willingness to increase their shareholding, giving the company and its shareholders more stability while fostering confidence in the company itself and creating a favorable market perception.

Target investors in a strong economic scenario

The importance of having target investors even during good economic scenarios is multifaceted and crucial for a company’s success. Firstly, it is essential to seek strategic alignment: finding investors who share your long-term growth vision and understand your business model ensures a mutually beneficial relationship. Seeking a diverse shareholder base is also critical to reducing dependency on any single group and improving reputation among financial institutions.

Furthermore, establishing effective relationships with target investors is essential. A proactive engagement with these investors not only helps to communicate the company’s story effectively, but also creates strong relationships, ensuring long-term support and stability even during market volatility.

There are also additional benefits for maintaining and identifying target investors: a diversified shareholder base helps protect the company against market fluctuations and corporate activism. Engaged investors are more likely to invest in the company in the future, ensuring access to capital. Investor relationships can ultimately lead to better corporate governance practices, increasing the market’s confidence in the company and promoting its long-term credibility.

Target investors in a challenging economic scenario

Having target investors during challenging economic periods is even more important for the company, as it helps to access capital, reduce volatility, control the narrative and identify growth opportunities, bringing strength for it to overcome crises. The strategy of maintaining target investors allows companies to connect more effectively with those who are most likely to invest during economic uncertainty, therefore ensuring capital to maintain operations and continued growth.

Furthermore, committed investors tend to remain loyal even during downturns, bringing more stability to the shareholder base and contributing to the company’s resilience during challenging economic periods.

During periods of recession, it is essential for companies to communicate, precisely and effectively, its adaptation and cost reduction strategies to investors. A proactive and transparent relationship with investors can help ensure they understand and support these new guidelines, thus strengthening their trust in the business and ensuring a less disruptive crisis management.

Furthermore, periods of economic downturns can bring unique opportunities at attractive valuations, and by mapping investors, companies can identify those who are willing to take advantage of these long-term growth opportunities, allowing companies to be strategically positioned for the future.

How to map target investors?

Mapping these investors involves research, networking and effective communication efforts to build valuable connections with the right ones. Investor profiles can be mapped according criteria such as type of organization, function, sector, geographic location, assets under management, investor style or investors of a company’s peers.

Below we highlight some of the actions taken by IR professionals to identify target investors:

• Market Research: Analyzing industry trends, market dynamics, and he profile of peer companies can provide insights into the investor landscape for each company. This type of research helps identify investors that are already active in the sector and who invest in peer companies.

• Networking: IR professionals should actively seek out networking opportunities at conferences, roadshows and investor events. These events are valuable for meeting potential investors presented through mutual acquaintances.

• Communicating with investors: maintaining transparent, regular and proactive communication is appealing to investors and creates a good reputation for the company.
• Corporate access: One of IR’s roles is to ensure that company executives talk to the right people, and one way for this to be done is to promote effective contact to the right sell-side analyst, so this analyst can present the right investors. We have our own article on Best Practices for Engaging Sell-Side Analysts.

Types of institutional investors

Institutional investors are entities that gather large sums of capital from different sources to invest in the financial markets, exercising significant influence. There are different types, including:

• Alternative: A type of unconventional investment typically held by institutional investors and/or high net worth individuals. Alternative investments typically include private equity, venture capital, real estate, and commodities.
• Banks: Financial institutions authorized to accept deposits, grant loans and offer a variety of services, such as sales, negotiations and advisory services on mergers and acquisitions.
• Family Office: manages family wealth, playing an essential role in administrating and preserving the wealth of high-net-worth families.
• Foundations: a non-profit entity funded through donations and investment assets from an individual or legal entity, usually for philanthropic purposes.
• Hedge Funds: adopts strategies that may include financial derivatives, leverage, long and short-term positions, arbitrage, investments in global markets, among others. Hedge Funds are mainly focused on generating absolute returns, regardless of market conditions, protecting against specific risks and seeking profit opportunities in different scenarios. Unlike traditional funds, Hedge Funds have more flexible investment approaches and can adopt more complex and risky strategies. – Insurance: These are institutional investors focused on the combining long-term assets and liabilities. An insurance company’s investment approach varies according to the line of business.
• Investment manager: institutions that make investment decisions on behalf of clients. In general, they consider the clients’ objects and risk parameters. To achieve this, they conduct detailed market analysis, evaluate investment opportunities, research different sectors and asset classes, and implement asset allocation strategies aimed at maximizing returns and minimizing risks.
• Pension Funds: these institutions are vital for managing funds that are used as retirement benefits to an organization’s employees. They invest in a wide range of financial assets aimed at seeking consistent long-term returns. Besides ensuring the financial security of a company’s employees, they significantly influence the financial markets.
• Private Banking: entities that provide financial advisory to high-net-worth individuals. Several wealth management activities are typically included, such as portfolio management, estate planning, and tax services.
• Sovereign: a type of institutional investor representing a government or government entities, such as a sovereign wealth fund. These investors may allocate large sums of capital across several assets, including shares, bonds, real estate and other financial instruments, aimed at generating returns for the economic benefit of the country or region they represent. Sovereign wealth funds are typically established by governments to manage a country’s financial reserves and diversify its investments internationally.

Each type of institutional investor has its own investment objectives, risk profiles, and regulatory frameworks that guide its investment strategies and decision-making processes.

These are some of the tips given by IR Magazine and which MZ agrees and recommends to its clients. To effectively map target investors, MZ can also help by conducting Targeting Studies, in which it analyzes the market to identify potential investors that are aligned with the company’s goals and growth vision. MZiQ’s Intelligence feature also provides valuable insights and strategic data, enabling companies to make more targeted decisions. Companies can count on MZ’s support to maximize their chances of success by identifying and attracting the right investors to boost growth and achieve goals.

If you have any questions, we are always at your service!

External Communications and MZ Research Team

About MZ

MZ (www.mzgroup.com.br) is the largest and leading independent global player in investor relations (IR) solutions.

Founded in 1999, the Company has surpassed the mark of 2,000 websites published, currently serving over 800 companies and investment management firms listed on 12 stock exchanges.

To empower IR strategies, MZ delivers innovative technologies and exceptional customer service, ensuring long-term partnerships.