According to a March 18th article in the Wall Street Journal, Barry Rosenstein’s Jana Partners hedge fund has sold a 20% stake to Dyal Capital Partners (a division of investment manager Neuberger Berman). Industry analysts say this can be seen as a sign the activist shareholder strategy commonly employed by Jana is becoming more accepted by the mainstream financial community. Additionally, we noted recently that hedge funds were selling stakes as a way to monetize.
The deal values Big Apple-based Jana Partners at around $2 billion, according to sources with knowledge of the matter. Jana manages more than $11 billion, and is known for pushing for change to create shareholder value in the companies it invests in.
The stake is passive, so Dyal won’t have any input into Jana Partners’ operations, according to a Jana investor letter reviewed by the WSJ.
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Another sign hedge funds are becoming mainstream
Activists have been criticized by the mainstream financial community as speculators more interested in a quick profit than the long-term success of the firms they invest in. But recently they have brought in large amounts of cash from institutions as some firms seek greater returns.
The stake sale gives shareholder activist leader Jana Partners a stamp of approval from an established investment manager as well as more money to invest.
Dyal is a private-equity firm that has been an active buyers of stakes in hedge funds. Both Blackstone and KKR. have also recently bought up up stakes in several hedge funds.
Analysts note that hedge fund minority owners can earn good income from their share of fund fees, and are seen as increasingly attractive in today’s low-interest rate environment.
More on Jana Partners stake sale
“This investment will result in significantly enhanced, top to bottom alignment with our investors,” Jana Partners noted in the investor letter sent Wednesday.
Of note, only a portion of Jana Partners’ investments is activist. The fund generally tries to work with management and boards behind the scenes, but it will fight publicly.
Part of Jana’s appeal to Dyal, according to the WSJ source, is its collaborative approach to activist investing.
Jana Partners has recently taken profitable stakes in successful in specialty retailer PetSmart and supermarket chain Safeway, which both ended up selling themselves. Last month, Jana took an activist position in software maker Computer Sciences Corp., and has since said the company should seek a deal to improve shareholder value.