Fund managers hit out at favouritism
matthew drummond, John Kehoe, Sally Patten
1 August 2013
The Australian Financial Review
Copyright 2013. Fairfax Media Management Pty Limited.
Two more fund managers have issued a warning on the practice of exclusive briefings, adding to concerns by industry doyen Peter Morgan that they can give institutional investors an unfair advantage.
Hugh Dive, head of listed securities at Philo Capital Advisers which has $4.2 billion in funds under management, said he had personally seen instances of fund managers pushing companies to reveal market-sensitive information. The problem was most apparent at meetings between large fund managers and small listed companies where management was less savvy and smaller slivers of information more useful in trading.
“As a current large-cap portfolio manager and having been both a small-cap portfolio manager and a sell-side analyst, there is a massive difference between the levels of information you can get out of a small-cap company and say Westpac,” he said. “Fund managers are able to throw their weight around much more with small-cap companies.”
Glenn Woolley, a 29-year market veteran and managing director of Intrinsic Investment Management, which manages $800 million in Australian equities, said “mum and dad” shareholders and some professional investors were losing out a result of the favouritism.
“Selective briefings mean unequal access to information,” Mr Woolley said. “If you”re a shareholder, and some of your rival fund mangers are getting information that you”re not receiving, it”s unfair and contrary to the continuous disclosure regime.”
“We get annoyed when we discover as a shareholder that a broker is arranging an exclusive briefing with other shareholders and potential shareholders,” Mr Woolley said. “Why would you turn up to a luncheon or selective briefing unless you could learn some information that is material to the price of the company”s shares?”
But Greg Medcraft, chairman of the Australian Securities and Investments Commission, indicated he was not concerned at price-sensitive information being leaked. “If we hear that price-sensitive information is being given in other meetings, we may have more work to do. But that is not the position today,” he said.
Speaking in Brisbane, Mr Medcraft dismissed suggestions that analysts and large investors were given exclusive opportunities to assess online casino the quality of company managers through private meetings. He said individual investors could obtain similar information by attending annual shareholder meetings and reading annual reports.
On Wednesday evening, ASIC commissioner John Price said by and large markets in Australia were fair and efficient. But ASIC”s annual stakeholders” survey, to be released later this year, found some retail investors were concerned about information asymmetries and the leakage of price-sensitive information, he told a meeting of the Australasian Investor Relations Association. He did not respond to
Mr Morgan”s concerns that too much information was seeping out in one-on-one briefings with fund managers and that such meeting should be banned or at least a register kept of who is attending.
One small cap fund manager who did not want to be named said he thought meetings between fund managers and companies should be recorded so regulators could randomly audit what was said.
“This should be randomly audited – especially in light of selling before results or profit warnings. The cost of recording a meeting is negligible as most phones these days can cope with the task,” he said.