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.
Indispensable Career Advice (eFinancialCareers)
We’ve talked to plenty of bankers, traders and recruiters this year, each of whom has offered their fair share of advice for those growing up in the industry. Here’s the best of the best.
Dear Analysts: You’re Still Poor (eFinancialCareers)
If junior bankers spend like they're a somebody, they'll be financially insolvent in no time. Working in banking – especially in big cities – requires plenty of spending money.
The Year It Could Have Been (WSJ)
2014 saw $3.4 trillion worth of M&A deals struck globally, up about 30% from the previous year. However, it also saw a near-record $540 billion in aborted deals, double last year’s total.
Fee Curtain Collapses in Private Equity (Bloomberg)
No longer are private equity firms able to hide the fees they charge their clients. Following some heavy prodding from regulators, Blackstone and TPG Capital have unveiled what they charge on top of their traditional 2% management fee and their 20% take of profits. For Blackstone’s new fund, they’ll take as much as $20 million from investors.
It Pays to Work at Goldman (Bloomberg)
If you worked at Goldman Sachs in the U.K. in 2013, you likely had a good year. The firm paid its bankers there an average of $4.72 million, roughly double that earned by colleagues at other U.S. banks in London.
JPM Nips Deutsche in Investment Banking (Financial News)
In a bit of surprise, J.P. Morgan took home the award for the top investment bank in Europe, narrowly outlasting Deutsche Bank, which has held the title since 2009. It’s good to work for a U.S. bank, no matter where you are located.
Citi Losing Bodies in Risk (Bloomberg)
Senior risk managers are flooding out of Citigroup, just as the bank needs them most.
Buzz Around the Office
Doctors were forced to remove a 7-inch turn signal rod from an Illinois man’s arm following a car accident. This probably wouldn’t count as news if it weren’t for the fact that the car crash took place in 1963 and he never knew it was there.
Quote of the Day: “Making resolutions is a cleansing ritual of self-assessment and repentance that demands personal honesty and, ultimately, reinforces humility. Breaking them is part of the cycle.”— Eric Zorn