Australia has a few fund managers – just a handful – that some company boards may consider as being ‘activist’, but this select group tends to be vocal only rarely and then never request board representation or long-term involvement in the company. But in the US, activism is almost an asset sub-class. Jeffrey Ubben and George Hamel Jr, founders of the 10-year-old USbased activist manager ValueAct Capital, which has been scoping out Australia to offer its services, don’t see themselves as activist investors in the way we may perceive corporate raiders who use the press, proxy battles, threats and worse to affect change at a company. They are proud of the fact that in only about 50 per cent of their investments over the last decade have they exercised their rights to a board seat.

They are value investors, sure, but they prefer to see the value of their stock selections unlocked more organically. The poster child of US activism is probably Carl Icahn who, Ubben said, has a vastly different style. Icahn tends to be transactiondriven rather than showing the normal patience of an institutional investor. These days, Icahn only needs to announce his stake in a company and the share price will spike. It’s not greenmail, which is illegal in the US as it is in Australia, but it’s not a million miles removed. Ubben says that the governance of US public companies is “broken”. There is a principal/agent problem in many boardrooms. He is CIO and Hamel is COO at ValueAct. They worked together at Blum Capital Partners before starting ValueAct. About 10 per cent of the US$5 billion they manage is their own money, invested in 64 “core” investments in 10 years, of which 20 have been sold. They hold their core investments for between three and five years. They also invest in “farm team” stocks, named after the feeder clubs that service American A-league sports.

These are investments where ValueAct has taken less than 5 per cent, and therefore hasn’t yet gone public with the news, while assessing whether to go further with the company. The aim is to hold between 5-25 per cent of a core stock longer-term. “We’re not looking for opportunities which are just activist opportunities,” Ubben said. “We’re looking for great business models that, for some reason, are going through a periods which means they’re at good valuations.” “What we do is a lot like private equity,” Hamel said. “We’re primarily invested in public companies but we have a performance component … We go into a boardroom to get all the information we can and decide what’s best for all shareholders.” Like private equity managers, ValueAct looks for unleveraged companies because the manager wants to be a part of the capitalisation process. Lazy cash is usually a good find. “About half of our portfolio looks like a traditional valueinvestment and the other half looks like private equity,” Ubben says. The company was backed by a family office which sold its minority stake to Affiliated Managers Group (AMG) in 2007.

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