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Thursday, May 23, 2024
13D Activist Fund

Investment Process

The 13D Activist Fund seeks to invest in 20 to 40 activist situations that we believe will successfully lead to the realization of enhanced shareholder value. We analyze each 13D event and make a decision as to how much, if any, to allocate to the Fund. The investment decision is based primarily on an analysis of the history/track record of the activist, type of activism employed, sector and probability of a success. The decision is based primarily on an analysis of the 13D event. Among other things, we analyze the activist, his track record, the sector, and the activist’s track record in that sector. Additionally, we look at the activist strategy that will be employed and the type of returns that strategy typically creates. We also make a judgment on the probability for success of the filing based on the activist’s experience, the shareholder base and other factors. The fundamental analysis of the company is largely outsourced to the activist. Our investments are spread among many top activists with different activist styles, strategies and sector expertise.

The average holding period for these types of 13D investments is 15 months. The success of the Fund does not depend on being able to capture the initial price bump1 that occurs when a 13D is filed. In fact, we expect that we will never capture the return on that price bump. For the types of investments we focus on (investments in companies with $1 billion+ market caps by premium activist investors), 13D Monitor data shows that historically there is an average 2.65% one-day bump in the stock price. However, 13D Monitor data also shows that these 13D filings produce an average return during their 15-month life that outperforms the S&P 500 Index2 by approximately 16%, after the 2.65% bump. We focus on capturing this long-term growth for shareholders, and are not as concerned with any initial, small bump in return.

1 The difference between the closing price on the day prior to the 13D following and the closing price on the day following the 13D filing is referred to as the “bump”.
2 The S&P 500® is regarded as a gauge of large cap U.S. equities. The index includes 500 leading companies in leading industries of the U.S. economy, capturing 75% coverage of U.S. equities.