Speech to corporate law students highlights role of activist hedge funds in ‘changing corporate landscape’
SEC chairman Mary Jo White warned activist investors to steer clear of false or misleading statements and unfounded accusations in a speech calling for activists to ‘act responsibly and according to the rules’.
Speaking to corporate law students at the Tulane University Law School in New Orleans, White said increasingly intense activism is changing relationships between shareholders and management in some cases and activists are increasingly launching campaigns over corporate control and other issues not related to good governance.
‘While activists traditionally focused on small and significantly underperforming companies, many of them today are also targeting larger issuers that are not necessarily poor performers,’ White said. ‘And the campaign objectives appear to be shifting, with breakups, a review of strategic alternatives, and corporate control transactions featuring more prominently, and governance issues arising less frequently.’
She also singled out activist hedge funds, which she said now have a collective $120 bn in assets under management, an increase of 30 percent from last year. According to industry analysis firm Hedge Fund Research, activist funds led gains among hedge funds last month, with the HFRI ED: Activist Index, which measures the performance of hedge funds that mainly pursue activist investment strategies, rising 4.4 percent in February.
‘Hedge funds are playing a much more prominent role in this space and their size and influence are growing; interesting, new players are joining their ranks,’ White said. ‘Their growing presence has undeniably changed the corporate landscape. But is that good or bad, or both? As you know, an intense debate is taking place in the business, legal and academic communities as to whether activism by hedge funds and others is a positive or negative force for US companies and the economy.’
