Activist Investors Hold Dry Powder; Big Firms On The Radar

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New analysis suggests that the amount of assets under management held by activist funds may be more than double what previous estimates have indicated. The folks at Activist Insight shared a copy of their most recent Activism Monthly Premium report. They estimate that as much as $209 billion in assets may be managed by activist investor funds. That’s compared to past estimates of closer to $100 billion, which they say probably ignore non-U.S. activist funds ValueWalk readers can receive 33% discount on  Activism Monthly Premium by using this link to purchase a subscription).

Estimating activist-related funds

Activist Insight also reports that 50 of the activists they focus on primarily manage an aggregate of $159 billion in assets. The top names they track include: Carl Icahn with $38.6 billion in assets under management; Bill Ackman’s Pershing Square Capital Management with $18.2 billion;  Dan Loeb’s Third Point Partners with $18 billion; ValueAct with $14 billion; and Europe’s Cevian Capital with $11.8 billion under management.

The main reason investors listen when major activist investors talk is because their funds have dramatically outperformed other funds. For example, data from Activist Insight indicates that while ValueAct Capital managed only $7.8 billion in 2012, the fund has almost doubled its assets since then.

These activist funds are also in high demand from institutional investors, according to Josh Black, editor of Activism Monthly Premium.

“Estimates of the firepower commanded by activist investors have traditionally been U.S.-centric,” Black told ValueWalk in an email. “This analysis confirms that activists are able to influence a greater range of companies in jurisdictions all over the world.”


Activist strategies

In collecting and analyzing data on activist funds, Activist Insight looked the profiles of more than 300 activist investors. They examined funds like ValueAct and Pershing Square, which primarily focus on activism campaigns, as well as funds that only sometimes target companies with activist campaigns. They examined 1,233 different positions.

The researchers found that usually activists take positions far below the control threshold, often rallying shareholders through proxy battles. They discovered that the size of the average activist stake is about 9.5%. That’s at the high end of what’s considered to be the activist sweet spot of between 5% and 10%.

The 5% to 10% range typically provides an advantage in proxy battles and / or poison pill limits. Also, Securities and Exchange Commission rules require activists to disclose a 5% or greater stake within ten days of passing that level. In addition, investors that hold a stake greater than 10% are often considered to be affiliates, which means they are limited in being able to sell shares in certain periods.

activism activist

What the growth in activism means

Researchers at Activist Insight believe that the growth in activist funds will result in a mixture of two developments. They expect the number of activist campaigns to increase and the size of the companies that are being targeted to increase.

In fact, there have already been signs that these two developments are already happening. For example, Carl Icahn targeted Apple Inc. (NASDAQ:AAPL) after investing $3 billion in the company. Also Bill Ackman is targeting Allergan, Inc. (NYSE:AGN) in an attempt to push the Botox maker into being acquired by Valeant Pharmaceuticals Intl Inc (NYSE:VRX) (TSE:VRX)


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