We activist investors saw some high highs and low lows in the year. Mr. Market overwhelmed our good work with its stagnant or declining trends. And, some outstanding activist work won out, even if it took some time to play out.
Activist Investing Aggregates
As we close 2015, estimates of activist fund AUM range from $130 billion (Hedge Fund Research) to over $200 billion (Activist Insight, which includes non-US assets). Most observers agree that AUM only ticked up in 2015, as the market downdraft offset positive activist investing outcomes.
These assets did ok, too. For 2015, HFR estimates that activist hedge funds are up 2.2% (through November), worse than last year when activist funds increased 8.5%. This is comparable to other event-driven funds and other hedge funds, and a little better than the broad market indices.
Even more companies
Shark Repellent reports 355 separate activist projects in 2015, compared to 347 in 2015 and 274 in 2013.
[drizzle]And, what companies!
- Trian staged a proxy contest at DuPont, the biggest activist project of the year, and one of the biggest ever. Trian failed to win any BoD seats, as CEO Ellen Kullman won kudos from corporate interests everywhere. A few months later, DuPont ousted her, and has announced a merger with Dow.
- Ethan Allen prevailed in a proxy contest, notable for how company leadership engaged with its investor base.
- And, H Partners prevailed at Tempur Sealy, notable for how the firm rounded up investor opposition to the BoD.
- GM headed off an interesting activist project, through force of will and an $8 billion share repurchase.
- Activist investors focused on even larger companies: AIG, American Express, Qualcomm, and even General Electric.
Overall, activist investors did a little better in 2015 than in 2014. Shark Repellent reports in 2015, activist investors achieved BoD representation in 127 contests, compared to 107 in 2014.
Corp gov improved a bit, too.
Investors also pursued the typical range of corp gov reforms, with similar success as 2014. Proxy access sped along. And, Georgeson reports in its always-useful corp gov summary that shareholders submitted about the same number of corp gov reform proposals to companies in 2015 as in 2014, with fewer exec comp proposals since say-on-pay took hold, and more other corp gov proposals. Shareholders had a similar success rate in 2015 as 2014, too.
A quiet year at the SEC
Not much going on, other than clarity on how companies can exclude some types of shareholder proposals.
Cash, short-termism, R&D, exec comp, and everything else
Activist investors fended off all manner of challenges related to our long-standing demands for efficient balance sheets, with proper cash balances. We highlighted the debate on R&D, share repurchases, long-term thinking, layoffs, and exec comp. We also comment on institutional investors’ role in this debate.
Some more great research
Several studies impressed us:
- A comprehensive survey of past research on activist investing returns
- New research on the impact of advanced forms of activist investing
- The latest work from Bebchuk, Brav, and Jiang that analyzes the long-term impact of activist investing
- A comprehensive (read: long and detailed, 300+ pages) analysis of activist investing impact, on corp gov and returns
- Two studies (here and here) that find at best-mixed results from activist investing, still worth reading.
This work adds nicely to the growing scholarly literature on activist investing. Earlier, we highlighted a number of other interesting, new academic papers.
We continued to build the toolkit for activist investors, with guides to advance notice provisions and activist investing information sources. Numerous other resources are available at the TAI website.