BOSTON May 30 The Council of Institutional
Investors gained a pair of prominent activist firms as
non-voting members this year, as big public-sector money
managers find more common ground with the outspoken
The changes are coming about as institutions invest more in
activist funds, which showed healthy returns last year.
The two groups also are increasingly taking similar
positions on corporate governance issues at the companies in
which they invest, like executive pay and board accountability.
The new activist members of CII, an association of mostly
big-money long-term investors like public pension funds,
corporate funds, and endowments, include ValueAct Capital and
Institutional investors have in the past dismissed activists
as interested only in short-term gains, but now many recognize
that activists hold company stocks for extended periods and
share longer-term goals, new CII Chair Jay Chaudhuri said.
"Increasingly we're on the same wavelength. It's less like
the Hatfields and McCoys," he said in a recent interview,
referring to a famous family feud during the U.S. civil war.
The new activist members have no voting rights on council
policies, but can offer input and help pick priority issues.
Other non-voting activist members include Red Mountain Capital
Partners, which joined in 2012, and Blue Harbour Group, which
joined in 2011.
Legion Managing Director Ted White said the signups show how
activist funds have learned to work with institutional
investors: "The institutions are more supportive, because they
look at what the activists have done," White said.
He cited cases in which activists and institutional
investors have worked together recently, like Timken Co's
spinoff of its steel production unit under pressure from
the California State Teachers' Retirement System and Relational
ValueAct partner Allison Bennington said it joined the
council because it generally agrees with the group's goals like
reforming corporate director elections. "If a lot of their
policies were adopted across Corporate America, we would
probably see better financial results," she said.
Tensions remain between activists and institutional
investors, however. Late last year activist Carl Icahn urged
Apple Inc to buy back $50 billion more stock than it
had planned, setting off a backlash from CII members worried
that an increase would benefit short-term investors looking to
In an interview this week, Icahn defended his approach and
said his returns far exceed those of the pension funds. He also
sent a list of his long-tem holdings including 11 companies
owned for more than a decade such as American Railcar Industries
Inc and Federal-Mogul Holdings Corp.
Compared to public fund managers, "I am less short-term than
most of these guys," he said.
(Reporting by Ross Kerber; Editing by Richard Valdmanis and