The present economic environment presents an attractive outlook for activist hedge fund investors. With a muted economic growth outlook, high corporate cash balances, a large supply of un-invested private equity capital and an increasingly hospitable climate for shareholder friendly corporate governance practices, activist investors are finding numerous opportunities to execute their value enhancing investing strategies. At NEPC we believe that activist strategies can play an important role in enhancing the returns of long-term investment programs, although with an eye to managing the associated risks. Investors can implement this strategy in multiple ways; either as a part of their hedge fund or private equity portfolio or as a substitute for their long only equity allocation.
In this paper, we elaborate on various aspects of activism, including both its associated risks and rewards, as well as why we believe the strategy is particularly attractive in the current economic and market environment.