Enquire recently recorded in front of a live audience of IR professionals and listed company leaders. The panel discussed how companies can navigate today’s challenging equity market and position themselves to attract capital.
Clara Melia, Founder of Equitory, hosted the discussion with Natalie Bell from Liontrust Asset Management, Thomas Moore from Aberdeen, and Rae Maile from Panmure Liberum. Each panellist brought distinct perspectives shaped by their investment focus and experience in UK capital markets.
The Shift from Quantitative Easing to Reality
Thomas identified the shift from quantitative easing to normalised interest rates as the fundamental change reshaping UK equities, more significant than Brexit, COVID, or events in the Ukraine.
He explained that the era of negative interest rates encouraged poor capital discipline, but with positive discount rates restored, companies are exercising capital discipline by investing in sensible projects and distributing excess capital through dividends or buybacks.
He views this as creating a “wonderful environment” for UK corporates that are now generating positive returns.
Finding Value in Outflows
Natalie highlighted the valuation opportunity emerging from sustained outflows. She noted growing international interest as investors reconsider their concentration risk in US markets, presenting a significant opportunity for UK equities.
Companies are increasingly marketing overseas to spread their equity beyond traditional UK investors and Natalie expressed hope that international recognition of UK valuations would broaden from large caps into small and mid-cap companies.
The panel acknowledged management frustration with current valuations. Natalie noted that fund managers face similar challenges with outflows. Her key message was that selling doesn’t necessarily indicate lack of conviction but rather reflects broader flow management, making feedback between companies and investors especially important.
The Reality of Reforms
When asked about UK market reforms, Rae observed that whilst reforms have been widely discussed, their practical implications haven’t materialised. He identified valuation as the core issue which is making acquisitions difficult to justify.
Thomas also highlighted potential improvements in execution speed, referencing Shawbrook’s aim to list within approximately two weeks. He said that accelerated processes like these could make the UK a more attractive destination to do business.
International Interest and Domestic Challenges
Rae confirmed positive growing US investor interest, though noted some definitional challenges with the UK market. European interest has remained limited, but this trend has been noticed by fund managers since before Brexit and recent geopolitical events.
The panel also stressed reviving domestic interest and discussed potential government interventions to assist, with Natalie noting that fiscal incentives to encourage domestic equity investment seemed aligned with political priorities but hadn’t materialised yet.
Simplicity Wins: The Three Numbers Rule
Rae’s advice on company communications centred on simplification and clarity. He argued companies should identify and highlight the three numbers investors truly care about rather than overwhelming them with complex figures.
His message was clear: investors want immediate clarity on whether results warrant an upgrade or downgrade, especially during busy results seasons.
Natalie echoed this, advising companies to address potential issues upfront rather than burying them deep in announcements, as investors will find them regardless.
The AI Question
The discussion would not be complete without exploring AI and emerging technology for fund managers. Natalie described extensive conversations with software companies about AI threats, noting how difficult it becomes to disprove AI risk once raised. She emphasised that using AI tools can help fund managers understand the pace of technological change.
Thomas took a slightly different view, suggesting that AI has caused de-ratings in supposedly bulletproof companies. He preferred investments in businesses where AI poses minimal threat, citing Galliford Try’s construction operations as an example where AI has limited disruptive potential.
Reasons for Optimism
Despite challenges including the upcoming autumn budget, each panellist expressed optimism when asked about their future outlook.
Rae kept it simple, emphasising the market’s affordability as evidenced by widespread share buybacks. Natalie cited increased pre-IPO marketing activity, with her team seeing four or five early-look meetings recently, suggesting returning market activity.
Thomas offered nuanced optimism, hoping the UK could navigate fiscal challenges whilst maintaining investor attractiveness. He recalled post-Brexit hopes and acknowledged the UK’s current distance from that vision.
Key Takeaways
The panel’s overarching message was clear: UK equities face structural challenges, but current valuations, improving capital discipline, and emerging international interest create genuine opportunities for companies that can communicate clearly and build authentic investor relationships.
For more insights from this live panel discussion on navigating today’s equity markets, listen to the full episode.
