Every year there is a trend among hedge funds, in 2012 mortgage and secured credit focused hedge funds ruled the top lists. Last year saw activists take the crown with the top gains, and most of them follow an event-driven strategy. HFRX Event Driven Index gained a 13.8% return in 2013 whereas the Activist Index gained 17.3% in the same period.
Activist hedge funds 2013 review
We are reviewing the leading activist hedge funds of last year. These guys were successful in instigating a change in companies or at least in their share price. With help from Bloomberg’s best performing list of hedge funds, here is the roundup.
Dan Loeb – Third Point
Third Point Offshore (AUM $6.8 billion) managed to net a +24% return through the end of December. One of the most aggressive activists around, Dan Loeb’s Third Point led some less high-profile battles this year. He pursued changes at Sony Corporation (NYSE:SNE) (TYO:6758) and Sothebys (NYSE:BID) last year, and the stock of each rose 50% and 65%.
Loeb’s other event driven fund, Third Point Ultra, recruited a gain of 28.8% through the end of October. This one manages $2.3 billion.
For a more detailed account of what Dan Loeb picked and made money on, read our earlier coverage.
Mick McGuire – Marcato Capital Management
We profiled McGuire a while back; his relatively new hedge fund had its second consecutive year of great returns. The Pershing Square alum reported a 24% return through the end of November last year after gaining some 28.7% in 2012. Marcato began business in 2010 and in the span of a couple of years, he has managed to shake up more than 5 companies. In 2013, McGuire zeroed in on Sothebys (NYSE:BID), where he has the largest position among his peers, and Lear Corporation (NYSE:LEA) where he had his nominees accepted to the company’s board.
McGuire’s other proxy fights included DineEquity Inc (NYSE:DIN), Corrections Corp Of America (NYSE:CXW) and Trinity Place Holdings Inc.
Jeff Ubben – ValueAct Capital
Who knew Microsoft Corporation (NASDAQ:MSFT) would become one of the hot holdings of a well-known hedge fund? Jeffrey Ubben’s ValueAct Capital scored a brilliant 29.5% return in the last year, according to II Alpha. However, the Windows maker was not Ubben’s most profitable bet: his $12 billion fund rose the most as Valeant Pharmaceuticals Intl Inc (NYSE:VRX)’s stock doubled over the last year. Ubben has pushed the company to cut down costs, focus on the more profitable genetics business and also brought changes in the executive management. All of these factors helped Valeant in outperforming its peers.
Regarding ValueAct’s other top holdings, Motorola Solutions Inc (NYSE:MSI) gained 25% whereas Adobe Systems Incorporated (NASDAQ:ADBE) was up 62% last year. ValueAct and Microsoft have signed a cooperation agreement and some have speculated that the ousting of Steve Ballmer was engineered by Jeff Ubben. ValueAct’s managers sit on the board of Adobe Systems, Valeant Pharmaceuticals Intl Inc (NYSE:VRX) and have the as yet un-exercised option to sit on Microsoft’s board.
Nelson Peltz – Trian Partners
Trian Partners is managed by Peter May, Ed Garden and founder Nelson Peltz. The fund was up 38.4% through December 20 thanks to some great picks and having his demands approved in some ventures. Peltz put pressure on Mondelez International Inc (NASDAQ:MDLZ) to cut costs and also pushed PepsiCo, Inc. (NYSE:PEP) to spin off its beverage business and acquire Mondelez to become a snack food giant.
Peltz also had a position in Sothebys (NYSE:BID), the auctioneer, which also contributed to his hedge fund’s return as it brought some changes in its top management. Peltz also initiated a position in E. I. du Pont De Nemours and Co (NYSE:DD) in the third quarter of 2013. He has been holding talks with the company’s management to increase future growth.
Christopher Hohn – The Children’s Investment Fund
Hohn bagged a 47% return last year in the master fund which manages $7 billion. Hohn led successful activist campaign at EADS, the airplane maker know for Airbus. TCI pushed the company to sell its 46% stake in a military aircraft maker and use the proceeds to issue a dividend or start a stock buyback.
Larry Robbins – Glenview Capital
With 84.2% net return through the end of October 2013, Larry Robbins essentially made it impossible to compete with him. However Robbins is a milder type of activist, who prefers to keep his “activism” which he likes to call “suggestivism” off the radar, he said to Bloomberg. Glenview Capital Partners with $3.9 billion under management is up 39% for the year through the end of November, according to HSBC Hedge Weekly.
His bets worked out in everything he bought, including the bunch of medical companies he thought would benefit from the Obamacare act. Even though the practical application itself is not working so well, Robbins had a highly profitable year in Thermo Fisher Scientific Inc. (NYSE:TMO) up 77%, McKesson Corporation (NYSE:MCK) up 68%, Tenet Healthcare Corp (NYSE:THC) up 35%, HCA Holdings Inc (NYSE:HCA) up 58%, and Humana Inc (NYSE:HUM) up 52%; all of these are healthcare-related companies.
One of his most celebrated bets this year has been Health Management Associates Inc (NYSE:HMA), where Glenview held the largest stake. The activist was successful in getting shareholder approval to replace the entire board of HMA, which is a rare win for a hedge fund.
Other activist hedge funds
Other activist hedge funds who bagged a great return in 2013 were Red Mountain Partners, which gained 31.5%. Red Mountain manages $367 million. Clifton Robbins’ Blue Harbor Strategic Value Partners was up 19.8% until the end of October; the fund manages $1.3 billion. Clifton Robbins is also a friendly activist who most recently pushed Chico’s FAS, Inc. (NYSE:CHS), an apparel store, to expand its business.