Enquire, the Investor Relations podcast

Episode 54: Rae Maile - Beyond the Numbers: Rae on Investor Psychology, Regulation and Effective IR

• Clara Melia

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In this episode of Enquire, Rae shares insights from 36 years as an analyst covering both financial and tobacco stocks. He discusses how regulation, ESG pressures and shifting investor psychology have reshaped the market, and why clarity of messaging remains critical for listed companies. Rae explains what fund managers truly value, how AI is changing research, and why the UK market needs a re-rating to stay competitive. From pre-IPO preparation to effective results-day communication, this conversation offers practical guidance for IR teams and candid reflections on the future of equity research.

In this Episode:

  • How years in fund management and broking shaped Rae’s perspective on markets
  • The real impact of MiFID II and why UK equities continue to lag
     • What needs to happen for the UK market to achieve a meaningful re-rating
  • Why tobacco remains a compelling investment case despite ESG pressures
  • How investor psychology drives valuations more than quarterly numbers
  • The three financial metrics analysts focus on first every time
  • What makes IR communication stand out on results day
  • The limits of AI-generated research and where human judgement still wins
  • Common pre-IPO pitfalls and how to prepare a story investors will buy
  • Why site visits and candid conversations still matter in a digital world

Quotes:

  • "AI can summarise numbers, but it can’t have a view. It can’t take a CEO to lunch."
  • “Clarity, consistency and communication. That’s what supports a higher multiple.”

Resources:

Connect with Rae on LinkedIn

SPEAKER_02:

We've been at the raw edge of regulation all the way through the last decade, and none of it has been helpful. It's not just Brexit, it was long before that.

SPEAKER_00:

Welcome to Inquire, the Investor Relations Podcast. In this podcast, we speak with senior IR professionals on their career experience to share knowledge and learnings around IR strategies. We also speak with portfolio managers and self-ide analysts to explore their view of investor relations and what constitutes best practice.

SPEAKER_01:

Welcome to the podcast, Ray, and thank you very much for joining me today.

SPEAKER_02:

Thank you.

SPEAKER_01:

So let's start by understanding your background experience and current role. Can you tell our listeners about your fascinating career history?

SPEAKER_02:

Sure. So I've been in the city for over 36 years now. I started as a fund manager for the first almost a decade, moved into broking with Casanog in 1998, initially as financial specialist sales, but then took on coverage of the other financial sector. I started doing tobacco as a broker from 1998, but had been following the sector from the early 1990s. And then from Casanog to JP Morgan at the time in MiFID 2, went off to Sencos thinking that the big banks were the wrong place to be for MiFID 2. And after a while at Sencos, joined Panmure and then Panmure Liberum six years ago.

SPEAKER_01:

And how did you end up covering two such different sectors across the Enterprise Financials and Tobacco?

SPEAKER_02:

Accident of history as much as anything else. Clearly, fund managers listening to this, they're well used to following lots of different sectors. So in that decade in fund management, I'd covered all sorts of things. By the time I joined Casanov in 1998, like I said, I was joining Steve Financial Specialist Sales, but one of the first fund managers I ever worked with gave me the sagest advice, which is brokers don't have something interesting to say every day of the week. So I needed something else to do along the way. I've always enjoyed the more fundamental side of the work, the getting stuck into the numbers. Tobacco was just getting going as a sector. We were doing the demerger of the old BAT industries. And I'd been following tobacco since the early 90s when it was all about litigation in the States. And you couldn't teach anyone any of that, but I knew all of it. So it was easy just to pick it all up. And for clients, when we were going along to talk about what was going to be Zurich Financial Services and BAT, I could do two stocks in one meeting rather than them having to do two different meetings. So it was kind of efficient. After that, once a franchise was established, then why would you give it back to the market for free? There was often a conversation with management about should I focus on one or the other. And the point I always made was, well, if it's not broken, why try fixing it? The fact is that actually the more you do, the harder you have to focus on what's important rather than filling your time with writing overly long notes which don't actually conclude very much. I think it's been really useful for me and my coverage to be able to have a broader coverage of many different issues and then focus on what's most important to investors.

SPEAKER_01:

And can we talk a little bit about the tobacco industry? As obviously, there are strong views on that sector, particularly from an ESG standpoint. So, how do you see the regulatory and ESG narrative evolving around tobacco, uh, particularly given the rise of new categories like reduced risk products and ongoing pressure from investors?

SPEAKER_02:

Yeah, it's a good question because obviously BEAT and Philip Morris International in particular have majored on the journey to a smoke-free world. And I've taken task with those companies a bit because you can't afford to leave smokers behind. It's still the vast majority of the industry profits today and will be for some considerable time to come. And therefore, I do believe you shouldn't smoke, throw smokers under a bus. Now, whether this move will be enough to encourage ESG investors, well, I think we're still a long way away from that actually happening. If you look at where we've been with many ESG investors over time, actually it's largely been about global tech, global growth. It hasn't really been about other areas. It's never been a value-oriented kind of investment approach. And so I think even if you did get to a point where there were no more cigarettes, I think there would still be a legacy which would make it just easier for fund managers to buy something else rather than getting engaged in the debate. And I have some sympathies with that point of view. You know, there's a whole world of different things to choose from. But where I've been most frustrated have been fund managers who walked away from the sector claiming it was for ESG reasons when they didn't have an ESG mandate. And I think certainly the performance of take the UK stocks over the last three years has been substantial outperformance. It's back up to 4% of the market. There are plenty of people who didn't own the shares claiming it was for ESG reasons, who could have owned the shares and would have performed better if they had done. And I think that's where you're seeing a bigger shift in how people think about the sector these days.

SPEAKER_01:

And let's turn now to your role day-to-day as an analyst at Pamya Liberum. So, how has your average day changed since you first became an analyst?

SPEAKER_02:

I guess some things haven't changed. That free sign of excitement when R and S's start coming out, you can plan in advance for the ones you know are coming out. The more exciting are the ones that you didn't know were coming out. So that part of the job is the bit which still appeals most to me is that actually you don't know what a day will look like. As much as we can, it's about speaking to clients, it's about batting ideas around, it's about communication, it's not about spreadsheets, it's not about filling in numbers, it's not about target prices, it's about thinking, communicating, arguing, discussing, trying to influence views. That's that's the bit which is most exciting. And that bit hasn't changed. And that's that's the bit which is still the most interesting part of the job.

SPEAKER_01:

And just a couple of observations from my perspective. Are you seeing more unscheduled announcements post-MARS and market abuse regulation?

SPEAKER_02:

Not really. I think companies have become very good at understanding what they need to say and when they need to say it in a timely matter. I mean, that's good for the quality of the market. No one's hiding stuff away. Big, horrible profit warnings on a day when it's come out of the blue sky are rarer and people don't tend to store it up for results anymore, do they? I I do I do worry sometimes that we've got into a position of having a greater volume of output in terms of announcements with a reduction in quality. There's a lot of padding, a lot of saying things for the sake of saying things. Actually, if you can just put out one paragraph that says trading's in line with expectations, move on, then that's as much use as anything else.

SPEAKER_01:

Yeah, interesting point there about the length of RS announcements. And what's the information that's most relevant then to you as you review an RS?

SPEAKER_02:

Well, I think you and I have discussed in the past, in any company, there are three numbers that matter. Those three numbers will vary by company, but the company will know which ones are the most important. Ones, the market knows which ones are the most important. The job of the company is to make sure it highlights those three right up front. And you know, those outlook statements, don't bury them away on page five. Get those up front as well. And like I said, even if that outlook statement says there's no change to guidance, we're all time poor these days. There's too much going on, and people are stretched too thinly. Giving any investor, any analyst reassurance right up front is definitely what it's all about.

SPEAKER_01:

And in terms of advancements in technology, so for example, is Pamela Liberum adopting AI across the sort of sales team or equity research, how are you seeing any trends in that area?

SPEAKER_02:

There are certainly trials underway. I'm male, pale, and stale, so I'm not necessarily going to be at the forefront of using these things. I still think actual intelligence is probably better than artificial intelligence. And to me, I mean, you you look at some of the output from, dare I say, at bigger banks, and you can't help thinking that AI is already being used. The point for me, when we're looking at a set of results, when we're then trying to think about that set of results, and certainly when we're writing about it, our job is not to summarise the six numbers that are in there. Our job is to have a view. And I don't think AI yet knows how to have a view. AI doesn't know how to take a chief exec out for lunch and sit him down and find out how he's thinking about the world. It's not going to spot a change in direction of a company. It's only going to summarise numbers which are already there. And I don't think that really necessarily helps the investment process at all.

SPEAKER_01:

And what about social media? So you did a fireside chat with Gary Thompson, CFO of International Personal Finance PLC a couple of months ago. And I often see you reposting companies' social media posts.

SPEAKER_02:

Yeah, I mean, social media, again, male, pale, and stale. So my efforts on social media are probably somewhat limited, much to the chagrin of my children, no doubt. But the point, I guess, is it's about accessibility. In many of the cases where we've done these fireside chats, it's also a recognition of the fact that sometimes there are certain questions that everyone has. And if we can put the answers into a format which is more easily digestible, then it benefits the company because you don't have to sit through seven meetings all trying to explain the same thing. It benefits for managers because you get easy answers in a time-sensitive way, which is just helpful. But also it's a recognition that there's a retail market out there, which is increasingly important for many share registers. And we work our podcasts, we work our interviews in a way that we're avoiding giving investment advice. And therefore, these are products which can be available on company websites for everybody. And that I think all goes towards that point about educating and clarifying and simplifying a message so that people understand what it is they're investing in and why.

SPEAKER_01:

And next, let's talk about your interaction with fund managers. So, what percentage of your time is spent talking to the buy side? And what issues are most pertinent today?

SPEAKER_02:

I'm again goes back to what's an average day look like. I mean, the percentage will go between small and 100%, and it depends on what's going on and what's actually most interesting. Bearing in mind again that comment, no one's got something interesting to say every day of the week, even me. If you look at where people's concerns are, I mean, clearly being a fund manager in UK equities has been pretty tough over the last few years. It's pretty miserable experience having net outflows all the time, and that covers most of the client base when you look at the industry data. People are looking still to try and make money, they'll they're looking for help, they're looking for understanding. And in a market which is increasingly dominated by reportage and just target prices which are based on very little thought, people are thinking looking back to the old-fashioned ways of doing things where there's thought and understanding gone into an investment process. If you think about why share prices move, ultimately it comes down to more buyers than sellers. Now, if that's the case, it's psychology. What's the psychology of the market towards a company? How are how are views changing? How are things differing? What's a company going to do differently tomorrow than it did yesterday that's going to make people think there's an investment opportunity? That's the bit people are looking for. Where are the turning points? Where are the changes?

SPEAKER_01:

And what about the balance between short-term and long-term disclosure? Is that something companies get right?

SPEAKER_02:

I think any company has to have three things. It's got to have a vision, it's got to have a strategy, it's got to have some tactics. You can't focus on one at the expense of the others. You need to get all three nicely aligned. And obviously, from time to time, you'll need more on the tactical front to try and deliver on the strategy. As long as people know where you're trying to get, short-term wobbles along the way will always be understood and accepted, not necessarily enjoyed, but if there's a clarity to what it is that a company's explained it's trying to do, then shareholders will be supported. That's been my long history with companies. Everyone can cope with little wobbles along the way if the direction of travel is still clearly the right one.

SPEAKER_01:

And in terms of the international split of investors, how has that changed over the last 12 months? We're seeing a lot of US interest in UK.

SPEAKER_02:

Yeah, definitely. I mean, there's certainly been an increase in US interest. I mean, the end of US exceptionalism has been much vaunted. There's not necessarily an awful lot of evidence in it. As I always like to remind people, four of the magnificent seven do die if you watch the film. So there is definitely a broadening of interest, and the UK market is cheap by any international standards. There'll always be siren voices saying, ah, but look to Europe. But my my long history of going around seeing lots of investors all around Europe over a long period of time is that there's an awful lot of travel and not very much money at the end of it. And so I think the US is definitely where the turn will come in terms of that marginal buyer.

SPEAKER_01:

So what about Asia? Do you interact more with Asia or Australia or Australian investors?

SPEAKER_02:

Tammule Liberum has a partnership into Asia, and that's been valuable and useful, and it's a growing area of interest. Um the problem the UK's got is it's labelled as a value market rather than as a growth market. So what we need are more companies that can show more growth potential, and then that's when you'll get more interest.

SPEAKER_01:

And you touched on the UK market. So we're starting to see an uptick. I think there have been 14 IPOs in in London so far this year, um, some big names like Shawbrook recently, but delistings obviously remain elevated, coming back to your point around value in the UK. Do you see this balance shifting? And what do you think it will take for London to compete more effectively with other capital markets?

SPEAKER_02:

Yeah, we need a re-rating. I mean, no chief exec who wants to list his business is going to go for a market which is valued more cheaply than anywhere else. And as investors, if something new comes to the market, why would you pay a premium for that compared to something which you already own? And so there is obviously there's a chicken and egg element to all of this. I do believe there are some elements of government policy which are trying to encourage investment in the UK equity market, long overdue, I have to say, because we've been at the raw edge of regulation all the way through the last decade, and none of it has been helpful. It's not just Brexit, it was long before that. It's things like MiFID II. These have all been deeply unhelpful to the UK equity capital markets. And so we need to see some of that roll back. We need to see fund managers willing to take some of research costs back onto funds rather than through PLs, make sure there's more money available, make sure there's better quality research, and make sure that actually the market just operates better than it has done previously. And I think you're starting to see some elements of those things coming together. But we need good companies too, and I think there is a log jam amongst private equity where there's probably too many positions held at mark to carry rather than at mark to market, and therefore there is going to be a hiatus when some private companies come back to market rather than being thrown around between other private holders.

SPEAKER_01:

And can you share some of your experience when it comes to marketing IPOs on the sale side?

SPEAKER_02:

It's great fun. It's one of the few opportunities you have to genuinely have a lead over competitors because actually you are the one with the information rather than not. It can be soul sapping. I remember more than one IPO where I spent what month, month and a half working on it, only to be told on the last afternoon as I was walking through Frankfurt Airport that the deal had just been pulled because of market environment, which is deeply frustrating. But IPOs are good for the market, it's good for the infrastructure, it's good for sentiment that things are coming back to market. And so that's useful and helpful.

SPEAKER_01:

And what do you think good investor relations looks like when appointed the head of an IPO? Because from my experience, the the banks tend to sort of dominate in terms of the investor outreach. So, what do you think the role of IR should be in in pre-IPO work?

SPEAKER_02:

In pre-IPO work, it's about having that clarity of thought and message about what the business is actually about. There's an awful lot of fixation inevitably on the IPO itself and the first day of trading. But what happens a week later, what happens a month later, what happens six months later? Because you're going to get ended up in a situation where come that IPO, investors who want to be invested have bought the shares. They're in. Those that didn't aren't suddenly going to come rushing along three months later going, oh, I made a terrible mistake and I really should have owned this one. You really need a story which is going to develop over time, but also means understanding that you're not necessarily going to get the best price on day one. I worked on one IPO back in 2010 where we presented two possible share registers to a company, one at a higher price for people who were likely to not hang around on the register, and one on a lower price, which would have had a much better higher quality share register with proper follow-through thereafter in the aftermarket. And I think sometimes the mistake companies make is to focus only on the IPO itself and not where they're going to be a year, two years further down the line. Remember, you might take somebody off the table at the IPO, there'll be a lot more money left on the table.

SPEAKER_01:

And on the flip side, we're obviously seeing a lot of offers for companies from private equity. How do you think IR can best position the company in a defence situation?

SPEAKER_02:

The best defence is to have a higher share price. And the best way of doing that is make sure the story is clear, is understood, and is communicated consistently, and that the numbers back it up. Problem in many cases is sometimes the story runs a long way ahead of the earnings, and then there's an air pocket between the two. And so it's managing that process from one to the other. There is no other defense than a multiple which is too high for anyone to take you on.

SPEAKER_01:

Let's talk next about your interaction with companies, particularly investor relations. So, what's the one thing you wish every IR team did that would make your job and investors' jobs easier?

SPEAKER_02:

Make sure that if you call me on the back of a statement, you tell me something useful. Don't ring me up at five past seven in the morning and go through a rehearsed script which only tells me exactly what's already in the statement. I can read the statement, and in fact, you're stopping me from reading the statement by just telling me what's in the statement. Is there something else I need to know? If I'm not your broker, what's going to happen to consensus? Because that's the bit which actually matters to people on the day. You know, you can argue as much as you want about what happened in a six-month period which finished two months ago. But what I want to know now is a forecast going up or down and why? Because that's the bit the market cares about on the morning. The market wants to know what happens next, not what happened ages ago. And that's the bit which I think IR sometimes falls into a trap of over-rehearsing for the presentation, all of which was inevitably backward looking and doesn't spend enough time on the, but what does that mean next? And that's the bit which I really need first thing in the morning, and which the market is looking for.

SPEAKER_01:

And how have you seen the role of IR change over the last 10 years? I mean, we're seeing more and more subside analysts moving into IR. Is it more challenging for you to work with?

SPEAKER_02:

No, because they've got some empathy with what we're trying to do with any luck, and therefore they know what we're after, and therefore that makes some of the conversations a bit easier. Um, some years ago I did a presentation with some colleagues, and we talked about the impact of MiFID too, and it was to an audience of IR people, and we said our revenues are going down and your costs are going up. And I think that's definitely what's played out. There is inevitably a desire more to go directly to shareholders than go buyer brokers, which I understand. The counter to that is that for a fund manager that's running a 60 stock portfolio, probably has another 60 stocks on a watch list and 100 more stocks beyond that that they're also considering at one point or another, then actually they're not going to be experts in the company in the way that the broker will be. And therefore, actually, the broker still has a very important role to play in being able to distill the detail of a company's announcement into something which is easily understandable and which a shareholder actually wants to understand and use.

SPEAKER_01:

What does a goods meeting look like to you? And what would you like IR teams to provide differently when it comes to access to management?

SPEAKER_02:

I think it's always useful to check in with chief execs a couple of times a year or senior management. We can't be too demanding. People have got businesses to run, and it's it's not about us. But you do need to be able to pick up the phone, have a chat. It doesn't have to be an hour's meeting, it can be five minutes. It's just understanding how they're feeling about things because words on a page can't necessarily always just put across how sentiment works. We all sit here with spreadsheets, we all sit here with these company announcements. There are people behind all of this, and it's the people that deliver, and therefore it's understanding how that bit's working. That's the bit which is really the added value. That's the bit where you want to be able to look in the whites of someone's eyes and see how they're looking about things.

SPEAKER_01:

And as we start to wrap up the conversation, you say you don't pay attention to stock recommendations, but have you ever got it horribly wrong? Oh, often.

SPEAKER_02:

No one would be human if they didn't. Um, yes, no, more than once. Um and then the job is to not walk away from it. When I was a fund manager, the one thing that irked me more than anything else was if I'd worked with a broker on something and then had paid commissions to establish a position and it mattered, and then it went wrong, and then they'd downgrade from buy to sell, going, Oh, well, actually, I just got it wrong and I just walked away from it. It's like, well, no, no, because I've still got the shares, and I can't necessarily just flip my mind like that. So now help me. So I've I've had some stocks which were spectacular successes, which turned into crashing failures. And your job always is to go back and go, right, what changed and where does the fault lie? What did I get wrong? Should I have seen it coming? If I didn't see it coming, where is the culpability? What's changed, and therefore what will get this right again? And to work through it with investors who still own the shares and say, right, okay, I've tried doing the will work again. This is what did work, this is what didn't work, this is how it could work, and that's why you probably want to hang on rather than quitting. I mean, inevitably there's always a gut feeling of it's gone down, right? Let's just cut it, run, come back again. It's not always the right thing to do. And that's that's where you've got to stand up and get counted. You can't just go and hide in a corner about it.

SPEAKER_01:

And what's the best event or most memorable interaction you've had with a company?

SPEAKER_02:

Well, that's a good question. In the old days when we used to do a lot of overseas tours with the tobacco companies, they were always fantastic. I love going to see a tobacco factory. But I guess anything where you come away with a better feeling and understanding for a company, and that that might just be an hour meeting a divisional director. It might be a two-day away day, it might, it doesn't really matter. It's about whether at the end of the event you've got a better understanding of what a company's trying to do. Like I said, we all can sit here and talk about spreadsheets, but in the end, someone's got to run a business, sell something, make some profit, and deliver that in in PL terms. And it's understanding how that all comes together. And the better understanding you can get of a company from going and seeing that company on the ground, then the better the feeling you have about how the overall share price will turn out.

SPEAKER_01:

And any kind of good examples of events that companies have hosted over the years?

SPEAKER_02:

Yeah, I I guess for me, one of the standout trips was a BAT trip to Asia, where you just got a proper access to lots of levels of management and you could see a consistency of approach right through a management team. And that was quite important. But then equally, just going to a strategy update from a new chief exec and a new management team, take Schroeder's at the start of this year. What you could see was a palpable change from an old management team to a new management team, and you could see a genuine level of intent and energy, the like of which I'd never seen before, especially not from very few companies, let alone Schroeder's. And that that really was quite impressive.

SPEAKER_01:

And last question is do you have any questions for me or the Equatory team?

SPEAKER_02:

Well, I guess having you are the ultimate gamekeeper turn poacher, aren't you? You you started in investor relations. As you look back on how your career has developed, how do you now from the outside look at IR teams? Do you think they're better?

SPEAKER_01:

I do. Um I think there's been a sort of upskilling of the profession, and I think that's been helped by two reasons. One, I think, is a growing recognition by companies of the value that good IR communication can bring to the business. And the second is there has been an influx of individuals of backgrounds in banking and on the sales side into IR. And as you said earlier, they have a good understanding, therefore, of the needs of the stakeholders they're communicating to and can adapt their communication form accordingly. So I think we continue to see a growing recognition of the profession and kind of reflecting that you see IR professionals moving into more senior financial or strategic roles within the organization. You have a very unique vantage point in in-house investor relations where you see the company from a sort of top-down perspective, and you have a very strong sense of what the issues are in the business, both from feedback from investors, but also where you're actually struggling to justify a decision that the company's made is often a sign that there might be an actual issue with the underlying decision that was made. So I think IR is a very valuable role, and it's great to see the sort of upskilling. When I started in IR 10 years ago, some IR roles are very much sort of admin related. It was organising sort of logistics around roadshows, and now you really see people who have such a firm grasp of the business and its issues sitting in that role. So it's been fantastic to see that that change and growing recognition of IR.

SPEAKER_02:

And I think you can see in many companies exactly that coming through, and it's to the benefit of everybody.

SPEAKER_01:

Well, I've really enjoyed the conversation. You've got fantastic insights and experience in the city. So thank you very much for joining me today.

SPEAKER_02:

Thank you very much.

SPEAKER_00:

And thank you for joining Inquire, the Investor Relations podcast. Please look out for our next episode.