How Activists Succeed: An Inside Look at the Controversial Hedge Fund Strategy That Works

Abstract

I examine activist hedge fund performance from the perspective of the activist. Activist hedge funds have historically appeared in the news and continue to be prominently reported in the media as a result of: significant investments in public companies, frequent new analyses evaluating their latest performance, and criticism from much of the business world. Using data acquired from 13Dmonitor.com, I begin with a comprehensive review of activist performance in the last 20 years, and compare my results to reports in the literature. I then examine activist performance over the years, and discuss the impact of Item 4 actions. Next, I explore the success level of activists, and the corresponding performance. I further consider the specific wording that hedge funds use in their Item 4 filings, and determine which have proven to be most successful. I then discuss several case studies from two of the most prominent activists. Lastly, I conclude with an evaluation of the value imparted by activist hedge funds as well as recent criticism conferred upon them.