Activist hedge funds hot and hiring

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From an outsider’s perspective (or if you are a CEO or board member of a major corporation), activist investment hedge funds are inescapably bothersome. They invest in companies that they believe are mismanaged, make a huge public stink about it, tattle to all other institutional and private investors, and then push to make major changes, typically involving displacing people who run the corporation.

The merits of activist investing have been debated ad nauseam. Many company leaders and pundits believe activists like Carl Icahn and Bill Ackman are merely looking to make a quick buck, inflating the stock using their clout and then dumping it after making ceremonial changes or those that only result in short-term gains, leaving the company in peril for the long-term. Or, if they are short sellers, they try to cripple the stock largely by mad-mouthing the company and its management.

On the other side of the coin, activists and other pundits feel that the confrontational style of investing keeps companies in line, demands accountability from the C-suite and exposes weaknesses that, if improved upon, can elevate shareholder value. But either way you look at it, activist investing is as hot as can be, and is creating jobs in two different ways.

First, there are the funds themselves. Roughly 70% of institutional investors they’re said they planned to invest in activist funds in 2014, with nearly 80% agreeing that activist campaigns drive shareholder value. Through November, activists held $115.5 billion in assets, up from $93 billion in the beginning of the year, according to the Wall Street Journal.

The deluge of assets is the direct result of the success of activist investors like Icahn and Dan Loeb. Activists earned a board seat in 73% of proxy fights in 2014, up from 63% a year ago. These funds are growing and hedge funds with similar strategies are launching. That means hiring.

Meanwhile, corporate boards that have seen the success of activist investors are beginning to play a bit of prevent defense. Rather than waiting to become front-page fodder, companies are hiring banks to advise them on preemptive defense strategies. Big Wall Street firms are now staffing up in these anti-activist advisory units.

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