The Pissing Contest That Is Nelson Peltz vs. Jeff Sonnenfeld by Activist Stocks

Over the past couple of weeks, the Yale School of Management professor, Jeff Sonnenfeld, has been taking Trian Partners (specifically, its founder Nelson Peltz) to task over the fund’s performance. Part of the story is that Sonnenfeld has been trying to defend DuPont against Peltz, where the activist hedge fund has been waging a proxy battle in hopes of getting board seats and breaking the company up.

As part of that, Sonnenfeld has called into Trian and Peltz’s record of generating returns for investors, noting that Trian’s return in 2014 was just 8.8%, while the S&P 500 returned 13.7%. Nelson Peltz has responded by saying that Sonnenfeld can’t simply use short-term returns, but has to look at the long-term picture for an accurate portrayal.

Nelson Peltz says:

We have generated a return of approximately 137% net of fees since inception, outpacing the S&P 500 by approximately 2,900 basis points. Shareholder returns for Trian portfolio companies on which Nelson Peltz served or serves on the board, from the day we invested until today, outperformed the S&P 500 by an average of almost 900 basis points annually.

Jeff Sonnenfeld says:

I am focused on the mediocre performance following Trian Fund Management’s board service than its investor success. Five out of 11 boards Trian has joined since Trian’s inception well underperformed the S&P 500 during the period of its service. Looking over the past three years, Trian’s cumulative returns at 54% are far below the S&P 500 at 74.6% and far lower than several leading activist funds.

It’s also interesting that Sonnenfeld has been defending DuPont against Trian for several months and just recently took to personal attacks on the fund. As we noted in one of last week’s daily activist emails, there’s a lot that Sonnenfeld isn’t tell us. Replicated below:

At our behest, the @joshkosman and the NY Post finally shine some light on Jeff Sonnenfeld’s “relationship” with DuPont CEO Ellen Kullman. Josh notes that being friends with Sonnenfeld has its benefits, a dig directly at his “closeness” with Kullman. Key takeaway, “…the professor [Sonnenfeld] backed DuPont CEO Ellen Kullman and bashed activist investor Nelson Peltz…Kullman received a Legend in Leadership award from Sonnenfeld in December 2013. None of the op-eds disclosed either the financial backing the companies supplied to the Sonnenfeld-led nonprofit or that CELI had honored their CEOs”

In any case, we’ve had a love-hate relationship with Trian for sometime. In doing a quick ad-hoc analysis of Trian’s official activist campaigns (where a 13D was filed), it’s pretty evident that Trian has been a mediocre performer.

Trian has filed seven 13Ds, with one big winner, being Dr. Pepper. Below is Trian’s 13D filings:

Nelson Peltz

source: Activist Strategy

Now, we dug a bit deeper and looked at the performance from the 13D filing date until today. Granted, five of Trian’s targets have outperformed S&P 500 on an annualized return basis, but overall, all of Trian’s 13D targets returned an annualized 11.2%, compared with the S&P 500’s 10% return. See below:

Nelson Peltz

source: Activist Strategy