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Institutional Investors Survey
Institutional Investors Survey
Institutional Investors Survey
Institutional Investors Survey
Institutional Investors Survey
Institutional Investors Survey
Institutional Investors Survey
Institutional Investors Survey
Institutional Investors Survey
Institutional Investors Survey
Institutional Investors Survey
Institutional Investors Survey
Institutional Investors Survey
Institutional Investors Survey
Institutional Investors Survey
Institutional Investors Survey
Institutional Investors Survey
Institutional Investors Survey
Institutional Investors Survey
Institutional Investors Survey
Institutional Investors Survey
Institutional Investors Survey
Institutional Investors Survey
Institutional Investors Survey
Institutional Investors Survey
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Institutional Investors Survey

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“Institutional investors survey” explores perceptions of top executives from banks, asset management funds, pension funds, and other types of institutional investors regarding the most important …

“Institutional investors survey” explores perceptions of top executives from banks, asset management funds, pension funds, and other types of institutional investors regarding the most important problems companies would face when issuing corporate bonds.
This Ernst & Young report is based on a survey of 21 C-suite level from a relevant range of institutional investors in Romania. The number of answers to the survey is relevant for the segment of institutional investors in the local market.

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  • 1. Institutional InvestorsSurveyRomania 2013
  • 2. Institutional investors survey – Romania 2013Page 2What is “Institutional investors survey”?“Institutional investors survey” explores perceptions of top executives from banks, asset management funds, pensionfunds, and other types of institutional investors regarding the most important problems companies would face whenissuing corporate bonds. .This Ernst & Young report is based on a survey of 21 C-suite level from a relevant range of institutionalinvestors in Romania. The number of answers to the survey is relevant for the segment of institutionalinvestors in the local market.5 mainfindings153% of the respondents evaluate the level of confidence in the economic system whendeciding to invest in new bonds, while 41% assessing the company’s potential to seizegrowth as being a decisive factor.The most important problems companies have to face when issuing corporatebonds locally relate to the corporate governance and the company’s mid-tolong-term commitments to stay and deliver.In three years time the oil and gas sector is estimated to replace the financialservices sector in the top of the most feasible industries.The industrial sectors that would be very interesting for the investors in case of acorporate bond issue are the power and utilities and oil and gas sector.2345Respondents believe that the net debt/EBITDA index is the most important financialfactor in evaluation of a corporate bonds issue after the cash flow and the debtservice coverage ratio.
  • 3. Institutional investors survey – Romania 2013Page 3Facts and dataFactors influencing corporate bondsinvestments: Economic stability Inflow and availability of funds Confidence in the regulatory systemEvaluation criteria for a corporate bond issue: Financial:– EBITDA– Net margins– Debt servicecoverage ratio– Debt to equity ratioKey concerns: Overpricing Lack of sufficient preparation Corporate governance Commitment to stay and deliverRecommendations:“Top 3” industries for financial investors:► Asset management companies included in our survey haveexpressed a defined interest in Financial services, Oil & Gas, andPower & Utilities.► Oil & Gas industry is also one of the sectors of interest for all typesof institutional investors.► Banks and pension funds assess that the most importantrecommendation for successful structure of a corporate bondsissue is the listing venue.► Asset management companies consider that the minimum issuevolume is important for the success of an issue.► 80% of banks and insurance companies do not invest in corporatebonds.► Asset management companies and pension funds are the mostactive in corporate bonds market.► Profitability indicators, such EBITDA and net margins, are mostsearched for by insurance companies.► Brand strength and market position are the criteria most looked forby the insurance and asset management companies, while marketsize and opportunity is the matter most search for by the banks.Current: Financial services; Oil & Gas; Power & UtilitiesWithin 3 Oil & Gas; Power & Utilities; Financial servicesyears Non-financial:– Brand strength andmarket position– Market size andopportunity– Management credibility
  • 4. Institutional investors survey – Romania 2013Page 4Institutional investors surveyRomania 2013The Romanian companies must become aware of thefinancing opportunities of the capital market. A strongargument will be the serious endeavor of education doneby the entities active on the capital market and by themass-media. In a time when banks hesitate in grantingloans, the corporate bonds might be a solution worthanalyzing by the corporations which need financing.Florin Vasilică, PartnerTransaction Advisory Leader
  • 5. Institutional investors survey – Romania 2013Page 5Does your institution or particular fund buy corporate bonds?(one answers)Question 1Almost half of the surveyed institutions/particular fund did not invest in corporate bonds duringthe last year. Moreover, entities managing funds higher than RON 1 billion were reluctant ininvesting in corporate bonds the last 3 years.Total Respondents: 21(Skipped this question: 0)0 1 2 3 4 5 6 7 8Less than RON 10 millionRON 10 million to 100 millionRON 100 million to 1 billionRON 1 billion to 5 billionRON 5 billion to 10 billionMore than RON 10 billionNumber of answersNo Yes, have invested in corporate bonds within the last 12 months Yes, within the last 2-3 years
  • 6. Institutional investors survey – Romania 2013Page 6Which of the following factors is likely to improve corporatebonds market sentiment?(one answer)Question 2A third of the respondents consider that the most important factor for improving the corporatebonds market segment is the stabilization of the macroeconomic conditions and 22% state thathigher corporate earnings would also have a positive impact on the capital market.Total Respondents: 18(Skipped this question: 3)33%22%11%11%11%Stabilization in macroeconomic conditionsBrighter corporate earnings outlookStabilization in equity marketsHigher investor appetiteSupportive regulation for issuers0% 5% 10% 15% 20% 25% 30% 35%
  • 7. Institutional investors survey – Romania 2013Page 7In your opinion, what are the key success factorsfor a corporate bonds issue?(one answer)Question 3There are a variety of aspects that are assessed by investors as factors for their combinedimpact on the success of a corporate bond issue, the ones being most frequently chosen areconfidence and readiness.Total Respondents: 18(Skipped this question: 3)22%22%17%17%11%Readiness to provide transparency and good corporategovernanceConfidence in issuers managementAttractive pricingCompelling pricingRight timing0% 5% 10% 15% 20% 25%
  • 8. Institutional investors survey – Romania 2013Page 88 respondents believe that the net debt/EBITDA ratio is the most important financial factor forevaluating a corporate bonds issue. Nonetheless the issue is evaluated through the combinedresults of more ratios, including the cash flow and the debt service coverage ratio.What are the most important financial factorswhile evaluating a corporate bonds issue?(multiple answer)Question 4Total Respondents: 18(Skipped this question: 3)44%39%39%33%28%Net debt/EBITDACash flowDebt service coverage ratioDebt to equity ratioEBITDA0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
  • 9. Institutional investors survey – Romania 2013Page 9Aside from the financial factors, the investors also consider a wide range of non-financial factors, asthey play an important part in the investment decision, of which of an essential importance are themarket position, the management credibility and the market size and opportunity.What are the most important non-financial factorswhile evaluating a bonds issue?(multiple answer)Question 5Total Respondents: 17(Skipped this question: 4)59%59%53%35%29%Management credibility andexperienceBrand strenght/market positionMarket size and opportunityFinacial reporting/contolsQuality of corporate strategy and itsexecution0% 10% 20% 30% 40% 50% 60% 70%
  • 10. Institutional investors survey – Romania 2013Page 10Confidence in the economic system, a factor that is not under the control of the issuer, isconsidered decisive by more than 50% of investors when assessing a corporate bond issue.The company’s market opportunity to seize growth is viewed by 41% of the respondents as afactor that would drive interest to invest.What factors drive your interest and motivationto invest in new bonds?(multiple answer)Question 6Total Respondents: 17(Skipped this question: 4)53%41%35%35%18%Confidence in the economic systemCompanys market opportunity to seizegrowthInflow and avalaibility of fundsConfidence in the regulatory systemCurrent evaluation level0% 10% 20% 30% 40% 50% 60%
  • 11. Institutional investors survey – Romania 2013Page 11The most important hindrances of the bond issuer are insufficient preparation for investorcommunications and the overpricing of the issue ranked equally by more than a third ofrespondents.In your opinion, what are key concernsof bond issuer candidates?(one answer)Question 7Total Respondents: 17(Skipped this question: 4)35%35%18%12%0%Overpricing of the issueNot enough preparation for investorcommunications and meetingsIssuer not having the right managementIssue not conducted at the right timeOther0% 5% 10% 15% 20% 25% 30% 35% 40%
  • 12. Institutional investors survey – Romania 2013Page 12The investors consider that a prospective bond issue candidate should ensure the existence ofan efficient financial reporting system and risk management system before undertaking theissue. Corporate governance is also an important element the infrastructure that is evaluated bythe investors.From an investors point of view, which areas of a companysinfrastructure are most important when preparing a corporatebond issue? (multiple answer)Question 8Total Respondents: 15(Skipped this question: 6)73%73%67%47%27%0% 10% 20% 30% 40% 50% 60% 70% 80%Financial reporting systemRisk management and internal controlsCorporate governance and complianceInvestor relations functionForecasting systems
  • 13. Institutional investors survey – Romania 2013Page 13From an investors point of view, what are the main issuesfaced by companies issuing corporate bonds locally?(multiple answer)Question 9The most important matters that companies face when issuing corporate bonds locally areassociated with corporate governance and the company’s mid-to long-term commitment to stayand deliver within the expected range.Total Respondents: 15(Skipped this question: 6)67%60%33%27%7%Corporate governance complaintsUnsure about companys mid-to long-termcommitment to stay and deliverCultural issuesLack of compelling reasons for cross-border listingOther0% 10% 20% 30% 40% 50% 60% 70% 80%
  • 14. Institutional investors survey – Romania 2013Page 14From an investors point of view, what are your keyrecommendations to companies post bond issue?(multiple answer)Question 1073% of the respondents believe that the most important part of the post issue monitoring, wouldbe to timely disclose the company’s financial information.Total Respondents: 15(Skipped this question: 6)73%67%60%60%60%Timely disclosure of finacial informationFulfill expectations given at issueDemonstrate strong operational excellenceProper corporate governance practicesOngoing active investor relations0% 10% 20% 30% 40% 50% 60% 70% 80%
  • 15. Institutional investors survey – Romania 2013Page 15Is the stock exchange venue important foryour investment decision?(one answer)Question 11The respondents have a common opinion on the importance of the stock exchange locationwhen deciding whether to invest.Total Respondents: 15(Skipped this question: 6)93%7%YesNo
  • 16. Institutional investors survey – Romania 2013Page 1640% of the respondents stated that liquidity is the key element of importance for a stockexchange venue as it ensures easy access to invest/divest.Why is the stock exchange venue important foryour investment decision?(one answer)Question 12Total Respondents: 15(Skipped this question: 6)40%13%13%13%7%0% 5% 10% 15% 20% 25% 30% 35% 40% 45%Liquidity is available for investment and/or divestmentOwn investment rules restrictionsConnectivity and accessibility to the exchangeAvailability of indices that track bonds performance andact as bencmarksConfidence in the regulatory environment
  • 17. Institutional investors survey – Romania 2013Page 17Current portfolio: what are the "top three" industry sectorsyou invest in?(multiple answer)Question 13The most attractive industry sectors for the investors are the financial services, which is also thesector with corporate bonds issues in the market, the oil and gas sector, and the power andutilities sector.Total Respondents: 15(Skipped this question: 6)60%53%40%13%13%Financial servicesOil and gasPower and utilitiesTechnologyTransportation and infrastructure0% 10% 20% 30% 40% 50% 60% 70%
  • 18. Institutional investors survey – Romania 2013Page 18In three years time, the investors will target the same top three industry sectors, however the oiland gas sector is estimated to replace the financial services in the top position.Expected portfolio weight in three years:what are the "top three" industry sectors you invest in?(multiple answer)Question 14Total Respondents: 15(Skipped this question: 6)67%47%33%20%20%Oil and gasPower and utilitiesFinancial servicesConsumer productsTechnology0% 10% 20% 30% 40% 50% 60% 70% 80%
  • 19. Institutional investors survey – Romania 2013Page 19How important is it to you while making an investment in bondsthat a company has a "Big Four" accounting organization as itsauditor? (one answer)Question 1587% of the respondents agree on the importance of investing in the corporate bonds of acorporation that is audited by a member of “The Big Four”, as it increases reliability of financialfigures.Total Respondents: 15(Skipped this question: 6)87%13%ImportantNot reallyimportant
  • 20. Institutional investors survey – Romania 2013Page 20What is your recommendation for a successful structurefor a corporate bond issue?(one answers)Question 16More than 50% of the respondents recommend listing on local market rather than listing on theinternational market to ensure a successful corporate bond issue.Total Respondents: 15(Skipped this question: 6)53%27%20%0%Listing on local market vs. internationalmarketUse of funds for investment vs.recapitalizationMinimum issuing volumeOther0% 10% 20% 30% 40% 50% 60%
  • 21. Institutional investors survey – Romania 2013Page 21The industrial sectors that would be very interesting for the investors in case of a corporatebond issue are the power and utilities and oil and gas sector.Which would be some of the local industries of interestfor you in case of a corporate bond issue?(multiple answer)Question 17Total Respondents: 15(Skipped this question: 6)60%46%27%20%13%0% 10% 20% 30% 40% 50% 60% 70%Power and utilitiesOil and gasFinancial servicesTechnologyTelecommunications
  • 22. Institutional investors survey – Romania 2013Page 22DemographicsThe results of this survey reflect theresponses received to ourquestionnaire in the period between15 April and 8 May 2013, from 21top executives of major institutionalinvestors active in the Romanianmarket.
  • 23. Institutional investors survey – Romania 2013Page 23DemographicsInstitution type Total amount of assets the managed29%29%19%19%5%InsuranceBankAssetManagementPension fundIndependentinvestmentadvisor0% 10% 20% 30% 40%33%24%19%10%10%100 million - 1 billion RON1 billion - 5 billion RON10 million - 100 million RONless than 10 million RON5 billion - 10 billion RON0% 5% 10% 15% 20% 25% 30% 35%
  • 24. Institutional investors survey – Romania 2013Page 24DemographicsJob description28%20%16%12%8%CEO/President/Managing directorOtherHead of business unit/ManagerCFO/Treasurer/ControllerChief Investment Officer0% 5% 10% 15% 20% 25% 30%
  • 25. Institutional investors survey – Romania 2013Page 25Thank you!

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