Is this the end of activist investing?
In 2017 activist investors targeted companies with multibillion-dollar market capitalizations, but compared to 2016 activity cooled. Now, this week it appears that one famous activist investor is seeing investors pull out of his fund at an alarming rate.
Activist investors, those who buy a large number of companies shares and use their influence to effect change at a company are either loved or loathed. In cases where they are successful at turning around a company they are championed as a shareholder’s best friend. But when they short, or bet on the collapse of company shares, they can be seen as an enemy.
In 2017, 805 companies were subject to activist events, down from the 843 the prior year, but well above the 744 in 2015, according to The Activist Investing Annual Review compiled by Schulte Roth & Zabel.
Now legendary activist investor Bill Ackman, who famously shorted Herbalife and got into a war of words with Carl Icahn, is seeing investors leave his Pershing Square Capital Management hedge fund at an alarming rate.
According to the Wall Street Journal, citing people familiar with the matter, Blackstone Group is cashing out of positions and JPMorgan Chase will no longer recommend the fund. Reportedly, investors pulled about two-thirds of the cash that could be withdrawn at the end of last year. Redemptions, which are limited to a portion of total assets, have continued at a similar rate this year, one source told the WSJ.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| BX | BLACKSTONE INC. | 119.71 | -3.48 | -2.82% |
| JPM | JPMORGAN CHASE & CO. | 180.89 | +0.93 | +0.52% |
Ackman has recently made a few bad bets, including Herbalife and Valeant Pharmaceuticals. But while Pershing Square is reportedly seeing investors cash out, overall shareholder activism also could be retreating.
A correction in the markets will likely be required for activism to break past records, according to The Activist Investing Annual Review by Schulte Roth & Zabel LLP.
In 2017, the trend was deals for large-capitalization companies and highlights included Trian Partners’ engagements with Procter & Gamble (P&G) and General Electric, Greenlight Capital’s engagement with General Motors, Third Point Partners’ engagement with Nestlé, as well as Pershing Square Capital Management’s bid for board seats at Automatic Data Processing.