We view activism as a critical, and often missing, tool of value investing. It is the process of seeking and investing in under-valued companies using traditional ‘value’ investing criteria and, as an active shareholder, seeking to enact change to create the catalyst which unlocks the value inherent in the company, pushing up the share price and/or increasing dividends or returning capital.
The key to successful activist investing is to have influence over a company which is proportionately greater than the Fund’s economic investment. This is done via the solicitation of support from other shareholders to effect change in a company which elevates the share price toward its intrinsic value.
Our investment philosophy also focuses on the potential risks associated with a potential investment; particularly on the nature of the risks (for example asymmetric or binary) and whether potential returns are adequate given potential risks.
There is considerable evidence from international academic studies and foreign-domiciled funds that activist investing offers the potential for attractive risk-adjusted excess returns.