The infamous Daniel S. Loeb is sheathing his claws — just a little — as he pursues his particular brand of hedge fund activism, a move likely to make the firm he founded, Third Point LLC, palatable to a growing institutional investor base.
Intrigued by five-year annualized returns more than double those of the average long-short equity hedge fund, institutional investors are looking seriously at activist funds like Third Point and its brethren, consultants and hedge fund managers said. Institutional interest is strengthening to the point that at least two activist hedge funds of funds will launch before the end of the year while other managers are contemplating starting similar funds, sources said.
Some institutional investors have or soon will get exposure to activist hedge funds, as consultants said many of the multistrategy and hedge funds of funds used by their institutional clients are adding them to their portfolios. For example, in the March 31 annual report of the BNY/Ivy Multi-Strategy Fund LLC, institutional hedge fund-of-funds manager Ivy Asset Management Corp., Garden City, N.Y., listed several activist funds among its portfolio holdings, including the Deephaven Event Fund LLC and Stark Investments LP.
Mr. Loeb's previous tactics ranged from scathing written criticisms of company managements to all-out public warfare with recalcitrant boards.
Sources said these were exactly the kind of activities most likely to alarm institutional investors sensitive to the political and public relations implications of union job cuts, factory closings, overseas job outsourcing and other changes often demanded, loudly and publicly, by the more antagonistic hedge fund activists.