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ACTIVIST HEDGE FUNDS DRIVING IMPROVEMENTS IN COMPANY PERFORMANCE – AIMA PAPER


Date: Tuesday, February 24, 2015
Author: AIMA Press Release

London – 24 February 2015: Activist hedge funds globally are driving improvements in the share price, operating performance and governance of the companies in which they invest, according to a new paper by AIMA, the global hedge fund industry body.

 

 The findings are contained in a paper, titled “Unlocking Value: The Positive Role of Activist Hedge Funds”, which AIMA has produced in conjunction with the law firm Simmons & Simmons.

 

 Among its findings:

·         Activist engagement by hedge funds is positively correlated to improvements in the share price and operating performance of targeted companies

·         Activist hedge funds seek higher standards of corporate governance from the companies in which they invest, which improves alignment of interest between management, shareholders and other stakeholders

·         Activist hedge funds leave a positive and lasting legacy, with a 25% improvement on average in the share price of targeted companies two years after an exit

·         Activist hedge funds are long-term shareholders, with an average holding period of about two years, compared to the equities market average of just three months

·         Contrary to popular belief, most engagement by activist hedge funds is collaborative and constructive

·         The activist hedge fund sector worldwide comprises around 165 firms and manages approximately $120 billion in assets – a six-fold increase in the last 10 years

·         The sector’s compound returns from 2012-2014 were over 50%

 

Jack Inglis, AIMA CEO, said: “An assessment of the value of activist hedge funds to the broader economy is long overdue. We regard activist hedge funds as the keys that are unlocking value in public and private enterprises, delivering gains to their investors, the companies in which they invest, and ultimately, the broader economy.

 

“By taking significant but non-controlling stakes in companies, and holding those positions often for years at a time, activist hedge funds are supporting improvements in the performance of thousands of firms around the world. Struggling businesses are being turned around, well-run businesses improved, capital more efficiently allocated and the interests of managers, shareholders and other stakeholders better aligned.

 

“What this means, more broadly, is that activist hedge funds are bringing improvements to the efficient allocation of capital and resources in the economy overall, which is one of the key benefits of capital markets financing as opposed to bank financing.”

 

The full paper as well as a four-page summary are available on the AIMA website.

 

Ends -

 

Note to editors

1.    The AIMA paper on activist hedge funds, “Unlocking Value: The Positive Role of Activist Hedge Funds”, can be downloaded from the AIMA website. A four-page summary is here. The full paper, which is available to members only, is here.

 

2.    AIMA’s paper on the impact of capital markets financing on the overall economy, which is referred to in this press release, can also be downloaded from the AIMA website here.

 

3.    The research in the activist paper was conducted by Simmons & Simmons.

 


 

For media enquiries, please contact:

Dominic Tonner, Head of Communications, AIMA

Tel: +44 20 7822 8380

Email: dtonner@aima.org

 

About AIMA

The Alternative Investment Management Association (AIMA) is the global hedge fund industry association, with over 1,500 corporate members (and over 8,000 individual contacts) in over 50 countries. Members include hedge fund managers, fund of hedge funds managers, prime brokers, legal and accounting firms, investors, fund administrators and independent fund directors. AIMA’s manager members collectively manage more than $1.5 trillion in assets. All AIMA members benefit from AIMA’s active influence in policy development, its leadership in industry initiatives, including education and sound practice manuals, and its excellent reputation with regulators worldwide. AIMA is a dynamic organisation that reflects its members’ interests and provides them with a vibrant global network. AIMA is committed to developing industry skills and education standards and is a co-founder of the Chartered Alternative Investment Analyst designation (CAIA) – the industry’s first and only specialised educational standard for alternative investment specialists. For further information, please visit AIMA’s website, www.aima.org.

 

About Simmons & Simmons

We are a leading international law firm with fully integrated teams working through offices in Europe, the Middle East and Asia, and bring experienced professionals to some of the most active growth markets today. Our focus on a small number of sectors means we are able to understand and respond to our clients’ needs. Our industry sectors are: Asset Management & Investment Funds, Energy & Infrastructure, Financial Institutions, Life Sciences and Telecoms, Media & Technology (TMT). We have a track record for innovation and delivering value to clients through new ways of working. Simmons & Simmons has a highly specialised international asset management and investment funds team. We have experts in fund formation, financial services regulation, trading documentation (including prime brokerage and derivatives documentation), corporate structuring and transactions, litigation, taxation and employment regulation. We have an in-depth understanding of the asset management industry.