6:00AM BST 22 Apr 2014
From http://www.telegraph.co.uk/finance/
The City will increasingly be targeted by activist hedge funds with 40pc of funds reporting they are looking at opportunities outside North America
Activist hedge funds have tripled the amount of money under management in the past five years and are aiming their cash piles at Europe, according to research compiled by FTI Consulting and Hedge Fund Research.
Such funds managed more than $93bn (£55bn) last year, almost triple that of five years ago and 42pc up from an estimated $65bn in 2012. The overall hedge fund industry is worth around $2.5 trillion.
Investors are pouring into activist funds, driven by higher returns of 16.6pc last year on investment which has far outpaced the average hedge fund return of 9.3pc.
As activism becomes a growing asset class for investors, proponents will have more power to increase their influence on M&A transactions and funds will be able to target even larger companies.
Out of the sample of economic activist funds engaged in more than 500 situations, 89pc believed there would be an increase in general activism, with involvement in M&A situations showing biggest increase this year.
According to the survey, 40pc of US investors are now looking at shifting their focus outside North America. Most recently, gaming analyst Jason Ader’s Spring Owl fund has gained a 6.1pc stake in bwin.party and has proposed four representatives onto the board. Edward Bramson’s Sherbourne Investments has taken a stake in Electra, following a passive involvement in 3i and a much more activist role in F&C Asset Management.
Transport company FirstGroup is also fighting pressure from US hedge fund Sandell Asset Management, and Elliott Investors has taken a stake in grocer Wm Morrison. Cevian Capital has also taken a stake in embattled security group G4S.
Cevian, one of Europe’s biggest activist investors, has said that it takes around three to five years to implement changes in larger companies.
In M&A, it is common for activists to take positions in target companies and push for an increase in the offer price – a practice that has been dubbed “bumpitrage”. However, the survey of leading economic activists by FTI Consulting in partnership with Activist Insight, has shown that 43pc of them are now willing to take positions in buyers and convince them not to do the deal.
Activists are also becoming more sophisticated in engaging with social media for maximum affect.
“When Carl Icahn took an activist stake in Apple, he announced it via Twitter,” Steven Balet, managing director and activism specialist in the Strategic Communications segment at FTI Consulting, said. “The impact was immediate and moved the markets – it was a lesson that everyone in the activist community noted and one that is likely to be emulated.”
By Ashley Armstrong
6:00AM BST 22 Apr 2014
From http://www.telegraph.co.uk/finance/
