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Digital Subscriptions > The Hedge Fund Journal > Issue 106 - August 2015 > Shareholder Activism As Private Equity Allocation

Shareholder Activism As Private Equity Allocation

The resurgence of the strategy a decade after first rising

Shareholder activism has experienced a resurgence over the last few years roughly a decade after first rising to national prominence in the mid 2000’s as a viable hedge fund strategy. While some of the previous denizens of this bountiful territory have long since run aground, in some instances spectacularly (Pirate Capital), many of the largest shops in the space have stayed afloat across the ensuing market cycles, honing their craft. Indeed, of the estimated $120 billion invested in the sector, perhaps 90% can be found concentrated in the hands of a few large investors – names such as Carl Icahn, JANA Partners, and Bill Ackman of Pershing Square.

The sheer size of these capital pools can arguably provide an edge in agitating for positive change at companies targeted by such firms. Often, the mere appearance of the activist itself is the event that catalyzes value creation for existing shareholders because other market participants recognize the past successes of the activist and immediately assign a premium to the stock based upon the name brand of the manager alone, usually the bigger the better.

In fact, recent research published at Vanderbilt University shows1 that stocks targeted by large activist hedge funds pop significantly more in the immediate aftermath of the announcement of the activist campaign than do equities targeted by smaller shops. Over the period of 10 days prior to the announcement to 10 days after, the targets of large activist firms jumped 10.9% versus just 5.2% for those of their lesser rivals.

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About The Hedge Fund Journal

INFORMING THE HEDGE FUND COMMUNITY With access to some of the industry’s biggest names and an astute and talented group of writers and contributors, The Hedge Fund Journal has established itself as a trusted source of information on the hedge fund industry. Highlights of Issue 106: Championing Customization: Amundi Alternative Investments Tackling UK Farming’s Funding Shortfall: Helping reform UK’s agriculture and alternative energy industries Shareholder Activism as Private Equity Allocation: The resurgence of the strategy a decade after first rising CME Group Crude Oil Spread Options Suite: Volumes advance with screen-based trading growing fastest Adding Dynamic Beta to Double Alpha: UBS Equity Opportunity Long Short UCITS
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