Tuesday, June 19, 2007

Calpers Jumps on the Activism Bandwagon

NYT's DealBook, June 18, 2007, 3:56 pm:

As shareholder activists grab the spotlight more often — the most recent example being The Children’s Investment Fund’s pushing for a sale of ABN Amro — one of the largest institutional investors in the United States has decided to hitch itself to itself to their star.
The California Public Employees’ Retirement System, the largest state pension fund in the country, will invest $12 billion with activist investors, a Calpers official said at a conference Monday, Bloomberg News reported. That would more than double the $5 billion the fund currently invests in such funds.
“Global activism is on the rise,” Christy Wood, a senior investment officer for global equities, told the GAIM conference in Monaco via videoconference. “Shareholders are increasingly taking an interest in what is happening in the companies they own.
DealBook has noted on more than one occasion that shareholder activism of late has earned handsome returns for practitioners. Studies by Columbia Business School and the Wharton School point out that activist funds have produced returns of at least 7 percent over the short term, with the stocks of targeted companies often remaining up over the longer term.
Yet both studies point to a worrisome trend for Carl C. Icahn, Daniel S. Loeb and their acolytes: more activists are chasing fewer good targets. The Columbia study, for instance, noted that average stock returns for targeted companies have declined from 10.6 percent in 2001 to 4.8 percent in 2005.
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