Hedge Fund Activists Prefer Cooperation to Fight

Carl C. Icahn Center for Science - Choate Rose...

Carl C. Icahn Center for Science – Choate Rosemary Hall, Wallingford, Connecticut, USA. (Photo credit: Wikipedia)

Many US-based hedge fund activists have become nearly as famous as the companies they attack. In Europe, though, it’s another story.

US activist fund managers are increasingly displayed in the headlines of national newspapers. Sotheby’s, for example, became the latest victim of hedge fund activist pressure when Dan Loeb of Third Point published a piece about the company’s chief executive.

European activist investors, however, remain comparatively meek.

Maarten Wildschut of RWC’s European Focus Fund, one of a handful of activist investment funds in Europe, says: “Aggressive activism in Europe has been tested…and broadly failed…If you are immediately hostile, you will not get cooperation.”

Instead, his team meets behind closed doors after gaining a foothold. Negotiations rarely become public as discretion is the key to success. From what can be derived, it is a process that has been successful.

Troy Gayeski, the Chief Investment Officer at SkyBridge, a fund with exposure to several US activist hedge funds, acknowledges the differences of culture between the two continents and believes that the differences exist for good reason.

One of Europe’s better-known activist hedge funds, The Children’s Investment Fund, is the exception. Its founder, Chris Hohn, has achieved notoriety for publicly shaming companies.

US activists, including Third Point’s Mr Loeb, Pershing Square Capital’s Bill Ackman, and Carl Icahn, unlike their European cousins, have become household names in financial circles.

Another striking contrast is the amount of activity among those who are in this line of work. Of the European trading companies, only 34 were targeted by public activist campaigns this year. When this is compared to the 149 in the US, one may wonder whether the US is just more reckless, or the Europeans less inspired.

More strikingly, the European companies were targeted by 24 activist fund managers, of which 10 were not even based in Europe. The 149 US companies, on the other hand, were coming under fire from domestic opposition.

What it comes down to is that while some hedge fund activists are justifiably aggressive in their dealings with their enemies, others seek to strike more diplomatically, creating a relationship of respect and grace.

Of those US-based activists, most are not seeking to find any notoriety. Rather, they seek to better the world for average middle class investors who cannot fight for themselves, most of whom do not even know there is a battle waging.

Lastly, it should be noted that while there are bad actors in the investment world, there are also many who we never hear about becuase they operate in exemplary fashion. One such investment professonal is Alex Duran who is also on the board of directors of Portfolios With Purpose, a charity that is centered around a fantasy stock trading competition. Mr. Duran has been in the news lately, but not for any kind of misbehavior; he’s been promoting philanthropy, discussing financial management strategies, and otherwise keeping a low profile.


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