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Let’s not be beastly to the hedge fund activists

Recent research belies the image of hedge fund activists as short-termists that destroy corporate value rather than create it.

When will “hedge fund activism” cease to be the three little words that company executives do not want to hear? As one hedge fund activist states in the roundtable discussion on page 134, the mention of the word “activist” on one hedge fund’s website led to such a flood of complaints that the strategy was renamed “ownership investing”.

Outcries from lawyers such as Marty Lipton that deem all hedge fund activists to be out for short-term gains have been blown out of all proportion. And now there is empirical evidence to prove this is so in the shape of research by Thomas Briggs, a US corporate lawyer with a different take on the hedge fund sector.

Of the thousands of US public companies, he found only 50 during the period that had become the subject of a significant hedge fund campaign. And in those 50 campaigns he found little evidence to suggest that any of the hedge fund activists had employed trading strategies that might encourage them to destroy corporate value rather than create it. There were just six possibly questionable situations, he says. Nor was there evidence that these hedge fund activists were doing anything underhand, such as diverting corporate monies to themselves.

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