Market pundits continue to highlight how recent years have been a reflection of a true resurgence in activism; with hedge fund titans launching a record number of campaigns and public battles. While true, it still doesn’t paint an accurate picture about where activism and sound corporate governance is heading. Since the financial crisis, the largest and most influential mutual fund companies have struggled to retain assets. They have lowered fees, become more instructive with governance and proxy influence and have consolidated to gain scale to continue pursuing the active asset management model. Though some firms have actually turned a corner on asset retention, by and large, they continue to struggle.
The elephant in the room, however, is that active management still remains a huge piece of the investment pie and there is still one major lever that can be pulled. Activist investing has been happening behind closed doors for some time, where PM’s and CIOs have made or even demanded changes from corporates, but that is all about to change. We are on the forefront of a new era, where your most traditional mutual funds will start pursuing publicly, and aggressively, campaigns akin to what we have seen from the most notorious of activists.
Certainly, it will be controversial and without question, in the interest of self-preservation on some level but current market conditions and public fervor have created an environment where this will be the new normal. What’s even more interesting will be how IR and C-suite executives choose to navigate this landscape; time spent with investors will continue to become even more important. Corporate vision will be at a crossroads of delivery and financial performance, unlike what we have seen from the community to date.
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