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Activist Investors See Opportunity in Rocky Markets

Market turbulence isn’t deterring activists in the way that it once did.

Dan Loeb, the chief executive of Third Point, at the 13D Monitor Active-Passive Investor Summit in New York City on Tuesday.Credit...Brendan Mcdermid/Reuters

Turbulent periods for the markets aren’t usually regarded as the best times for activist investors, the hedge funds that buy stakes in companies with the aim of forcing changes in corporate strategy, like selling businesses or doing stock buybacks.

But based on the packed crowd at the 13D Monitor Active-Passive Investor Summit in New York City on Tuesday — where the lines for coffee and macarons were scores deep with hedge fund executives, investment bankers and corporate lawyers — the business of activism is hotter than it has been in years, reports the DealBook newsletter.

“I had to come late to the conference because I was so busy,” said Darren Novak, the head of shareholder engagement and M&A capital markets for Europe, the Middle East and Africa at JPMorgan Chase, told DealBook.

Activist investors are seizing their moment. While volatile markets are often seen as bad for the kinds of moves that these hedge funds recommend, those who attended the conference saw a plethora of undervalued companies to push.

Dan Loeb, the chief executive of Third Point, disclosed in an investor letter that he had bought a stake in Colgate-Palmolive, with an eye to persuading it to make its pet food business a separate company. And Jeff Smith, the chief executive of Starboard Values, publicly took aim at Salesforce at the conference, saying the company had a “subpar mix of growth and profitability.”

Activist hedge funds were relatively quiet over the past two years. Professionals at the conference said that the optics of pushing for changes during the pandemic were not great or that some changes were not possible.

These investors are also benefiting from a securities rule change that requires companies to adopt universal proxy cards, which make it easier for hedge funds to propose directors for shareholders to vote on.

“Periods of rising tides hide a lot of problems,” said Caitlin McSherry, director of investment stewardship at Neuberger Berman. “When the tides go out, you start to see more problematic situations expose themselves. And we are looking to take advantage of those situations.”

Stephen Gandel is a news editor for DealBook. He was previously a senior reporter for CBS News, and a columnist at Bloomberg. He has covered Wall Street and financial firms for most of his career. More about Stephen Gandel

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