INSUBCONTINENT EXCLUSIVE:
BOSTON: Activist investors who are shaking up Corporate America with calls for operational fixes, refreshed boards and even sales of a
company are delivering their best returns in six years with double-digit gains for 2019 after big losses in 2018.
The surge in returns is
energizing experienced corporate agitators as well as newcomers and may force more companies into costly battles with shareholders over
their corporate future next year, managers, lawyers and bankers said.
Through the end of November, activist managers on average returned
13.09 per cent, according to data from Hedge Fund Research, which tracks various investment strategies' returns
Fueled by high double-digit returns at funds run by William Ackman, Barry Rosenstein and Glenn Welling among others, activists are handily
outperforming all other types of hedge funds where the average fund returned 8.5 per cent this year, HFR data shows.
The gains illustrate a
sharp recovery from 2018 when the average activist lost 10.4 per cent, in part because a late-year stock market tumble erased gains at many
funds.
Hedge funds run by activist investors are traditionally reserved for institutional investors and wealthy private clients.
To be sure,
activists are benefiting from this year's strong stock market gains where the Standard - Poor's 500 index has climbed 28.5 per cent so far
But many added spice with demands for changes or by watching earlier prodding pay off.
"Many of the initiatives that were advocated for by
our managers resulted in improved performance," said Gregg Hymowitz, chief executive officer of EnTrust Global, a large investor with
activist managers.
Through the middle of December, Ackman's Pershing Square Holdings portfolio gained 57 per cent, lifted by investments
including Chipotle Mexican Grill Inc, where Ackman helped install a new chief executive officer last year.
Douglas Braunstein's Hudson
Executive Capital gained 52 per cent through the end of November, fueled by gains at Cardtronics Plc which gave Braunstein a board seat last
year.
Some investors returned with fresh demands directed at companies they had previously targeted
Glenn Welling's Engaged Capital, which is up 30 per cent through November, came back to nutrition and weight loss company Medifast Inc while
Jana Partners took a second run at restaurant chain Bloomin' Brands Inc, which may consider selling itself
Corvex Management is up nearly 20 per cent through the end of November, months after its founder, Keith Meister, joined the board of MGM
Resorts International.
Representatives of the funds declined to comment.
In the United States alone, activists targeted 464 companies this
year through mid-December, roughly the same number as last year, data from Activist Insight shows.
Next year, activists may perform even
better, investors and managers said, noting there are plenty of inefficiencies to repair at smaller companies.
While fresh money many not
chase this year's strong returns as investors worry that a recession will hit at some point, investors said they are willing to fund
specific campaigns in so-called special purpose vehicles.
"Activists are value investors, which are starting to become more in favor," said
Ken Squire, who runs 13D Monitor and the 13D Activist Fund
"Over the past 15 years, activists went from being frowned upon to being accepted and now respected."