January 8, 2014 / 10:56 PM / 6 years ago

Activists trump most rival hedge funds with double-digit returns

BOSTON, Jan 8 (Reuters) - Activist investors, known for pushing corporations to perform better, recorded some of the best returns in 2013 when many rival hedge funds delivered only lackluster gains and failed to keep pace with the U.S. stock market’s rally.

On average, the roughly 60 funds tracked by Hedge Fund Research that specialize in activist investing returned 16.6 percent in 2013, the research group said on Wednesday. While that is still far less than the Standard & Poor’s jump of roughly 30 percent, it is far better than the average hedge fund, which returned 9.3 percent, HFR data showed.

Hedge funds that focused on technology and health care scored the biggest gains, returning 22.34 percent, according to HFR data. In contrast, short-sellers suffered double-digit losses of 16.36 percent as the U.S. stock market rallied.

Fund managers like Daniel Loeb, who demanded that Sotheby’s fire its CEO, and David Einhorn and Carl Icahn, who publicly pressed for change at iPhone maker Apple Inc, helped their firms’ 2013 returns.

But there are plenty of quieter activists whose portfolios fared even better last year.

Larry Robbins, who cringes at the term “activism” and prefers a gentler touch through what he calls “suggestivism,” guided his Glenview Capital Partners fund to a gain of 42.9 percent last year, an investor in the fund said.

Eric Knight’s KnightVinke fund, which has been urging Swiss bank UBS to dispose of its investment bank, ended the year up 37.23 percent, an investor said.

And Cliff Robbins’ Blue Harbour Group’s newly launched Blue Harbour Active Ownership Partners funds gained 30 percent, according to someone familiar with the fund.

But activism isn’t a sure path to success, in part because managers often have to make very public demands for change that can sometimes backfire. Prominent activist investor Bill Ackman’s $12 billion Pershing Square Capital Management absorbed a $500 million loss when he walked away from a bet on J.C. Penney Co Inc and his short bet against Herbalife has suffered at the hands of rivals like Icahn. Still, other bets worked out better, and his fund gained 9.3 percent for the year, an investor said.

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