Theyre back. Activist hedge fund managers, who agitate to force out entrenched company managements, are in fighting form for the 2011 proxy season and stalking companies hoarding cash.
Youre seeing more attention paid to activism, given corporate balance sheets cash reserves, says Jason Orchard, a principal with Spring Mountain Capital, a New Yorkbased investment management firm that focuses on alternative assets and invests with activist and event-driven funds. Companies are still a little leery on this recovery, but they have so much cash.
Finance 101 suggests that this capital should be put to work. Hedge fund managers, and the activists especially, look at those balance sheets and think they can optimize them, he says.
Perhaps the best-known activist-inclined U.S. hedge fund firm, William Ackmans $8.7 billion Pershing Square Capital Management, has a problematic but potentially rewarding activist position a 37.3 percent stake in ailing bookseller Borders Group. In December, Ackman told Borders management that hed be willing to finance a cash bid by the chain for rival Barnes & Noble. Borders took him up on the offer; Barnes & Noble hasnt commented. Meanwhile, Ackman recently got himself named to the board of J.C Penney, another of his targets.
Activists arent bound by borders or categories. New Yorkbased turnaround specialist
and private equity manager Sherborne Investors aims to replace the chairman of London-based F&C Asset Management with Sherbornes founder, Edward Bramson. A special general meeting was scheduled for February 3.
A further sign that activism is on the rise is start-ups. Keith Meister, the longtime right-hand man to grizzled corporate raider Carl Icahn, is launching his own activist fund. And Harbinger Capital Partners senior analyst Lawrence Clark has left that hedge fund firm to start an event-driven fund.
Meanwhile, a onetime activist, Daniel Loeb, founder of hedge fund Third Point, has toned down his antimanagement rhetoric in recent years, resulting in his activist fund receiving the less-provocative label event-driven. A buttoned-up Loeb who became infamous for his poison pen letters to CEOs plus Third Points strong recent results may just appeal to conservative blue-chip institutional investors wary of the activist label.