Mayne says the Future Fund and state government-backed managers Queensland Investment Corporation and Victorian Funds Management Corporation, none of which have supported local activist funds, have much to answer for: “you would think a Labor government would support the principle of holding companies to account”. The big retail funds managers, which run some of the country’s biggest funds, are constrained by commercial imperatives: they are owned by the big banks, whose clients would likely become targets for hedge fund activism. “The highly concentrated, almost inbred nature of the financial services industry is part of the problem.” Operating in the small-cap space, Sandon River is interested in engaging up to 60 target companies but the boutique has resources and capital to pursue only 15 at this stage.

Radzyminski founded the firm after running the funds management operation of a family office for a number of years – which involved managing highyield debt and listed and private equity assets. “This gave us a taste of being on the receiving end of poorly performing companies, and seeing opportunities where the only way to unlock value was by being an activist,” he says. While it seeks institutional backers, Sandon River also drives activist strategies on behalf of major shareholders in companies, and is speaking with smallcap portfolio managers to source opportunities for activism, and potentially collaborate on strategies.

Commenting on one persistent corporate governance problem at companies – the obscenely large pay packages for some corporate executives – Radzyminski says the incentives rewarding big pay packets, not the size of the payouts alone, should be overhauled. “While executive remuneration is a hot public debate, we don’t believe it’s the single worst thing. The vast majority of destroyed value isn’t the amount paid to people, but the perverse incentives created and bad strategic and tactical decisions,” he says. Pay structures that provide executives with reasonable base salaries and big bonuses for risky business moves created an asymmetry between management and shareholders, because the upside for executives is immense, and the downside limited, while the benefits from these big bets are comparatively small for shareholders. “There is more downside for shareholders if risks don’t pay off. But if they do, shareholders do okay, but managers do excessively well,” he says.

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