Professional investors are constantly in search of superior investment opportunities, and this of course requires access to superior information. And although we have seen an explosion of research and data in some areas, there's still a confluence of issues that limit access to information on companies in the emerging markets.
The number of funds looking at emerging markets has exploded, from several hundred firms ten years ago to nearly 4,500 today¹. One might think this would be accompanied by an increase in emerging market research coverage, but wide gaps persist. Take a country like Russia for example: only 37% of companies in the MICEX-100 are covered by at least one of the top ten global sell side research departments. And even when including research by local banks, 27% of those companies are still only covered by two or fewer analysts².
And this situation is not likely to improve. Equity research is generally viewed as a cost center, and since the businesses it supports within an investment bank are suffering from declining margins, it's no surprise that budgets for many research coverage areas have been cut (apart from some hot areas of interest like China and technology, of course).
This is why we are happy to announce ValueStream's newest addition to our Development Lab Program, and our first investment outside of the US: Closir Ltd.
Closir, a London-based startup, is aiming to fill the gaps in emerging market information and data. At its core, Closir is building a platform for investors and publicly traded companies to interact and exchange information in a more efficient manner. The greatest inefficiencies currently exist for companies in and investors targeting emerging markets, and so Closir's initial focus is on servicing these two groups.
For companies, Closir provides tools to easily manage Investor Relations functions using industry best practices, including information dissemination, investor communications, scheduling, new investor discovery, uncovering information on a company's existing shareholder base, and so on. This provides firms with a technological alternative to some of the functions traditionally performed by an Investor Relations consultant, at a large cost savings.
For investors, Closir's platform aids in the research and discovery of investment opportunities by providing access to accurate and valuable supplemental information supplied by the companies themselves, and by making it super easy to schedule corporate access meetings and calls.
I know firsthand from my experience as an analyst in the hedge fund industry that there are excellent investment opportunities to be uncovered in emerging markets, but getting to the information is rarely easy. And the lack of research analyst coverage isn't the only issue. Emerging market investors must overcome language barriers, differences in customs concerning shareholder communications and Investor Relations best practices, and unfamiliar legal/accounting regulations. We believe Closir can become an integral part of the solution to each of these barriers over time.
Closir's experienced founding team, consisting of Michael Chojnacki, Andre Powers, and Tim Greer, has firsthand experience in the Investor Relations consulting industry, at firms including BNY Mellon and Grayling. They quickly realized how technology could enhance the processes they were performing manually, and left to launch Closir in August 2014. We are looking forward to helping the team push their vision forward over the coming months and years.
Closir will officially launch its platform in Summer 2015, and at that time we will be sure to publish a more detailed description on how you can use Closir in your own workflows. But in the meantime, we would love to hear from you with your thoughts and suggestions on how to make this product most valuable to you. When launched, the Closir platform will offer significant benefits not only to Investor Relations teams and buy side investors, but also to many other participants in the capital markets, including:
- Emerging market stock exchanges seeking to enhance their visibility with foreign investors,
- Sell side research departments looking for help in increasing their coverage universe in the face of declining margins, and
- Financial media outlets wanting to broaden their coverage of emerging market trends and data.
It's easy to get in touch with us here. We look forward to hearing from you.
Sources:
1: Calculated by Closir management using data from Factset
2: Calculated by Closir management using data from Bloomberg