The pandemic has stalled activist investors, but for how long?
When coronavirus struck the US in March, even a group of investors that has earned the unenviable nickname vulture capitalists were reluctant to publicly attack companies reeling from the effects of the global pandemic.
Activist investors, who acquire stakes in companies and seek to force them to make changes in order to improve shareholder value, have largely remained on the sidelines this year.
Prior to the pandemic, activist investors were on track for a record-breaking year with $13.1bn deployed in January and February, but new campaigns fell to a multi-year low in the months that followed, according to data from investment bank Lazard.
Deterred by the volatility that gripped global markets in the early days of the pandemic and the likely public backlash of trying to capitalise on a global health crisis, activists focused on their own war chests.
But as the 2021 proxy season approaches, a time during which most companies hold their annual meetings where activists can propose changes for shareholders to vote on, executives once again have to think about who is on their shareholder register.
The market rout presented an opportunity for activists to build up stakes in companies at cheaper prices following the longest bull run in history. Now that markets have staged a recovery and companies have largely found their feet, it appears activists are once again ready to take centre stage.
During the third quarter, Trian Partners, the hedge fund run by Nelson Peltz, disclosed three new stakes. The New York-based activist had for months kept its positions a secret while it bought up shares in media conglomerate Comcast and asset managers Invesco and Janus Henderson.
Within weeks Invesco had agreed to give Trian three board seats and said it was working with the firm to improve performance.
More recently, hedge fund DE Shaw and Engine No 1, a newly launched activist investor, have called for changes at ExxonMobil, backed by large institutional holders such as the Church of England and the California State Teachers’ Retirement System.
Struggling sectors, such as asset management and energy, are popular with activists who are on the hunt for “shiny objects,” as Allison Bennington, a partner in the strategic advisory practice at PJT, calls them. She predicts that 2021 is going to be a busy year for activist investors.
“Activist funds, for the most part, have not performed well this year,” she said. “Therefore, there is a lot of pressure from investors in activist funds to make up for lost ground in 2021, which I suspect will lead to more aggressive actions and more of it.”