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Activist Managers, Hedge Funds

Analyzing Activist Investor Performance – Q1 2015 Update

Stan Altshuller Chief Research Officer

Our activist investor update shows changes within Q1 2015. Using public data, dive into their portfolios to discover outperformance.

Everything mentioned in this post is sourced exclusively from public data, including manager profiles, simulated performance and all other analysis and commentary. The data used here omits the short side, non-equity securities, many non-US securities and all non-public information such as actual fund performance.

Activist Investor Introduction

Activist hedge funds managers continue to command the attention of boards and investors alike. Our comingled, value-weighted portfolio that tracks the holdings of a group of prominent activist investor hedge funds has grown in assets and has outperformed the markets. The portfolio contains both passive and active investments for the managers. The group of roughly 60 Novus-identified managers that have been involved in activist investor campaigns over the last ten years, together represent $192.8B in market value (as of 6/30) filed with the SEC. This represents a 4.5% growth from one year ago even as the pace of growth is slowing this year.

activist investor 2015

The outperformance, however, continues to be strong.

Activist Investor Performance

Data shows that activist investors as a group have returned 12.6% annualized (not counting fees) compared to 7.7% of the S&P 500 from April 2004 through June of 2015. That compounds to a lot of outperformance over the years as we can see from the chart below:

activist investor 2015

Year-to-date, the activist investor portfolio is up 4% compared to 1.2% of the S&P 500. The manager heat map for YTD 2015 performance shows the largest contributors in dark colors – blue for positive and red for negative. This year ValueAct Capital and Pershing Square have been outsized positive contributors to the group while the stocks held by Elliot and the liquidating portion of ESL (mostly Lands’ End and Sears) have been detractors.

activist investor 2015

Activist Investor Portfolio Composition

Icahn has been dominating the activist investor scene recently in terms of both headlines and assets growth. His fund alone currently accounts for 17% of all the activist investor assets combined. ValueAct, Jana, and Pershing also command vast sums of capital, arguably a good thing for activist investors. Here are the top managers as a percentage of the total activist investor portfolio:

list of investor activists

It’s interesting to analyze the composition of the portfolio historically; looking at each activist investor as a portion of the total activist investor controlled assets shows the incredible rise and decline of certain managers and the steady growth and persistence of others.

activist investor 2015

Activist Investor Overlap and Uniqueness

There is very little evidence of group-think with activist investor managers. In fact, they tend to be very unique. We measured the overlap between activist investor managers’ portfolios in their active and even passive holdings and found very little similarity between them. Even including passive holdings, the most popular name among activist investor funds was Investors Bancorp, held by 5 managers out of 60. Compare that to Facebook and Allergan, held by 17 out of 49 Tiger Cub Hedge Funds and it becomes clear that activists comparatively tend to invest in very unique names. When looking at 13D activity (a form managers are required to file with SEC when initiating an activist investor campaign) we see even less overlap. It’s rare that more than one activist files a 13D in the same company. One such example is Valeant, a position held by four activist investor managers: ValueAct, Jana, Pershing Square, and Clinton Group. But only ValueAct and Pershing have filed a 13D (activist) on the name, for the others it is a passive investment disclosed on their 13Fs (general holdings).

Learn more

Do you invest in activist investor strategies or run a similar strategy yourself? Find out how the world’s top investors use data to give them an edge in this high stakes area of investing. Contact Novus for more information.

Actively Tracking Activists

Activist investors have been getting a lot of press lately. Parting from the secretive behavior common to hedge funds, many activists actually rely on media to amplify their claims, help influence public opinion and in turn drive profits on their positions. The attention has been well-deserved as of late as many campaigns have been successful in bringing about change in target companies, not to mention tidy profits for activists and their clients. However, this recent trend has been the benefactor of a persistent bull market, and risks do exist in this strategy, the main one being significant illiquidity.

Download the paper here.

Research Image - Actively Tracking Activists

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