activist fund / activist shareholder / activist investor

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pages: 302 words: 86,614

The Alpha Masters: Unlocking the Genius of the World's Top Hedge Funds by Maneet Ahuja, Myron Scholes, Mohamed El-Erian

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activist fund / activist shareholder / activist investor, Asian financial crisis, asset allocation, asset-backed security, backtesting, Bernie Madoff, Bretton Woods, business process, call centre, collapse of Lehman Brothers, collateralized debt obligation, computerized trading, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Donald Trump, en.wikipedia.org, family office, fixed income, high net worth, interest rate derivative, Isaac Newton, Long Term Capital Management, Marc Andreessen, Mark Zuckerberg, merger arbitrage, Myron Scholes, NetJets, oil shock, pattern recognition, Ponzi scheme, quantitative easing, quantitative trading / quantitative finance, Renaissance Technologies, risk-adjusted returns, risk/return, rolodex, short selling, Silicon Valley, South Sea Bubble, statistical model, Steve Jobs, systematic trading, zero-sum game

SECInvestor, September 8, 2008, www.secinvestor.com/2008/09/08/Ackman+Fights+For+More+In+Longs+Deal.aspx. “Ackman on the Rating Agencies: ‘Wait to Rate,’” New York Times Dealbook, June 2, 2010, http://dealbook.nytimes.com/2010/06/02/ackman-on-the-ratings-agencies-wait-to-rate/. “Ackman Questions Lampert on Sears,” New York Times Dealbook, May 6, 2008, http://dealbook.nytimes.com/2008/05/06/ackman-grills-lampert-on-sears/. “Activist Investor Bids for Barnes & Noble, Borders Merger,” Business Pundit, December 7, 2010, www.businesspundit.com/activist-investor-bids-for-barnes-noble-borders-merger/. “Bill Ackman.” http://en.wikipedia.org/wiki/Bill_Ackman. “Bill Ackman Buys Sears Holdings Corp., Target Corp., Greenlight Capital Re, LTD., Sells Staples Inc.” Guru News, November 17, 2007. http://www.gurufocus.com/forum/read.php?1,17371. Burton, Katherine. “Ackman’s Reputation May Get Marked Down in Target War (Update1).”

Trian Fund Management, who own nearly 30 percent of the company, has been working with Wendy’s management on operational improvements as well as the use of cash to buy back a significant amount of stock. This has led to downgrades of the company’s credit rating. “S&P has rated it CCC,” says Weinstein. “Not too good, and Moody’s is just a little better, at B—. We actually think it’s kind of a solid single B.” Weinstein then consults the credit spread, which at 230 basis points for CDS is more typical of a better-rated BB company. “We think a leveraged company with activist shareholders and an aggressive stock buyback program should not be trading at 230 basis points,” says Weinstein. And actually it was as low as 150 basis points in 2010 when we put the trade on. But we’re keeping it. And we own the stock.” Meanwhile, Weinstein keeps other developments in mind. “The restaurant sector has seen more than its share of LBOs, with Burger King as the most important example.

And this is where Maneet Ahuja’s book comes in forcefully and effectively. This interesting book takes you on a journey through the fascinating and still-mysterious world of successful hedge fund managers. You will make many interesting, and in some cases surprising stops along the way, getting to know managers, their philosophies, styles, quirks, and working practices. Maneet will tell you about the world of activist investors whose objective is to unlock hidden value in companies, either through operational improvements or through the more controversial company restructurings and asset stripping. She will also expose you to the inherently cynical and always-suspicious short sellers who obsessively plunge into the details to sort out underlying fundamentals from often intricate and possibly obfuscating packaging.


pages: 515 words: 132,295

Makers and Takers: The Rise of Finance and the Fall of American Business by Rana Foroohar

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3D printing, accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, additive manufacturing, Airbnb, algorithmic trading, Alvin Roth, Asian financial crisis, asset allocation, bank run, Basel III, bonus culture, Bretton Woods, British Empire, call centre, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, centralized clearinghouse, clean water, collateralized debt obligation, commoditize, computerized trading, corporate governance, corporate raider, corporate social responsibility, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, crowdsourcing, David Graeber, deskilling, Detroit bankruptcy, diversification, Double Irish / Dutch Sandwich, Emanuel Derman, Eugene Fama: efficient market hypothesis, financial deregulation, financial intermediation, Frederick Winslow Taylor, George Akerlof, gig economy, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, High speed trading, Home mortgage interest deduction, housing crisis, Howard Rheingold, Hyman Minsky, income inequality, index fund, information asymmetry, interest rate derivative, interest rate swap, Internet of things, invisible hand, John Markoff, joint-stock company, joint-stock limited liability company, Kenneth Rogoff, knowledge economy, labor-force participation, labour mobility, London Whale, Long Term Capital Management, manufacturing employment, market design, Martin Wolf, money market fund, moral hazard, mortgage debt, mortgage tax deduction, new economy, non-tariff barriers, offshore financial centre, oil shock, passive investing, Paul Samuelson, pensions crisis, Ponzi scheme, principal–agent problem, quantitative easing, quantitative trading / quantitative finance, race to the bottom, Ralph Nader, Rana Plaza, RAND corporation, random walk, rent control, Robert Shiller, Robert Shiller, Ronald Reagan, Satyajit Das, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Silicon Valley startup, Snapchat, sovereign wealth fund, Steve Jobs, technology bubble, The Chicago School, the new new thing, The Spirit Level, The Wealth of Nations by Adam Smith, Tim Cook: Apple, Tobin tax, too big to fail, trickle-down economics, Tyler Cowen: Great Stagnation, Vanguard fund, zero-sum game

By May 2015, Icahn’s stake in Apple had soared 330 percent, to more than $6.5 billion, and Apple had pledged to spend a total of $200 billion on dividends and buybacks through March 2017. Meanwhile, the company’s R&D as a percentage of sales, which has been falling since 2001, is creeping ever lower.5 What these sorts of sugar highs portend for Apple’s long-term future is anyone’s guess, but one thing is clear: the business of America isn’t business anymore. It’s finance. From “activist investors” to investment banks, from management consultants to asset managers, from high-frequency traders to insurance companies, today, financiers dictate terms to American business, rather than the other way around. Wealth creation within the financial markets has become an end in itself, rather than a means to the end of shared economic prosperity. The tail is wagging the dog. Worse, financial thinking has become so ingrained in American business that even our biggest and brightest companies have started to act like banks.

But in July of that same year, it embarked on $20 billion worth of stock buying, and the share price promptly rose by 7 percent.31 It’s a pattern that’s being repeated more recently at a record number of companies, including Yahoo, where CEO Marissa Mayer, backed by hedge fund titan Daniel Loeb, began boosting the firm’s share price several years ago by handing back cash to investors who hadn’t been persuaded by Yahoo’s underlying growth story. (Mayer later found herself under pressure from yet more “activists” looking to dissuade her from using a cash hoard from the proposed spin-off of Yahoo’s core search business for acquisitions rather than buybacks.32) She’s certainly not alone. The year 2015 set a new record for buybacks and dividend payments, as well as demands for even greater payouts issued by activist investors like Loeb, Icahn, Einhorn, and many others.33 What’s more, though many of us don’t know it, we ourselves are part of a dysfunctional ecosystem that fuels all this short-term thinking. The people who manage our retirement money—fund managers working for firms like Fidelity and BlackRock—are typically compensated for delivering returns over a year or less.34 That means they use their financial clout (which is really ours) to push companies to produce quick-hit results, rather than to execute longer-term strategies.

Chapter 2 will examine how financial thinking came to dominate American corporate life by telling the story of General Motors and of former secretary of defense Robert McNamara and the Whiz Kids, whose obsession with numbers decisively contributed to the loss of the Vietnam War, the decline of the American auto industry, and the ultimate spread of financialized thinking into every corner of American business today. Chapter 3 will delve deeply into the history of US business education and examine how and why it came to focus on balance sheet manipulation to the exclusion of real managerial skills. Chapter 4 will deconstruct our conventional wisdom around shareholder value by looking at how activist investors like Carl Icahn now call the shots at the country’s largest and most successful firms—such as Apple—at the expense of innovation and job creation. Chapter 5 will show how much of corporate America has come to emulate banking—how we’re all glorified bankers now—by tracking the history of General Electric, which is one of the great American innovators, but which became the country’s fifth-largest bank before trying to reclaim its roots in industry.


pages: 324 words: 92,805

The Impulse Society: America in the Age of Instant Gratification by Paul Roberts

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2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, 3D printing, accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, American Society of Civil Engineers: Report Card, asset allocation, business process, Cass Sunstein, centre right, choice architecture, collateralized debt obligation, collective bargaining, computerized trading, corporate governance, corporate raider, corporate social responsibility, creative destruction, crony capitalism, David Brooks, delayed gratification, double helix, factory automation, financial deregulation, financial innovation, fixed income, full employment, game design, greed is good, If something cannot go on forever, it will stop - Herbert Stein's Law, impulse control, income inequality, inflation targeting, invisible hand, job automation, John Markoff, Joseph Schumpeter, knowledge worker, late fees, Long Term Capital Management, loss aversion, low skilled workers, mass immigration, new economy, Nicholas Carr, obamacare, Occupy movement, oil shale / tar sands, performance metric, postindustrial economy, profit maximization, Report Card for America’s Infrastructure, reshoring, Richard Thaler, rising living standards, Robert Shiller, Robert Shiller, Rodney Brooks, Ronald Reagan, shareholder value, Silicon Valley, speech recognition, Steve Jobs, technoutopianism, the built environment, The Predators' Ball, the scientific method, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, total factor productivity, Tyler Cowen: Great Stagnation, Walter Mischel, winner-take-all economy

Telling the Market to Back Off For decades, conservatives complained that government was so deeply embedded in the economy, and had so much influence on the decisions of producers and consumers alike, that prosperity was no longer possible. Today, we can make a similar complaint about the financial markets, whose penetration into every part of our economic lives lies at the heart of the Impulse Society. In everything from the expansion of consumer credit to the rise of “activist” shareholders, the financial sector has gradually injected its requirements for high yields, quick returns, and capital efficiency into all walks of commercial life—and much of the rest of society as well. Financialization’s most infamous symptom is the overuse of consumer credit, and, clearly, we could strike a serious blow against the Impulse Society by helping consumers to rethink the practice of gratifying the present by borrowing from the future.

Since the shareholder revolution of the 1980s, not only have corporate managers become more eager to please financial markets—fully two-thirds of the average senior executive’s compensation is now in stocks and options7—but those markets are much harder to satisfy. The stock market today is ruled by so-called institutional investors—pensions, mutual funds, hedge funds, and, especially, hedge fund “activists”—investors who buy up large stakes in companies and then seek to influence share price. For these big institutional players, which collectively control around three-quarters of the shares of big, publicly traded companies,8 the hunt for yield is life’s overriding goal. To prosper—indeed, to survive—the institutional investors must please their own clients (everyone from retirees to billionaires), and this they do by setting aggressive quarterly “return targets” for their portfolios—targets that, as economists Eric Tymoigne and Randall Wray have pointed out, are generally well above the growth rates projected for the American economy as a whole.

Given the power that our new technologies give us to secure short-term rewards, it’s hard to see why we would have any incentive to behave otherwise. In a truly efficient market, such short-termism would be recognized and punished. But in the self-centered economy, the market is in on the scam. Thus, shareholders cheer when Microsoft or Apple or Intel spends tens of billions of dollars on share buybacks. Consider the following: in August 2013, Carl Icahn, the corporate-raider-turned-activist-investor, announced (on Twitter, naturally) that he had acquired a $1 billion stake in Apple, and was demanding that the company spend $150 billion to buy back its own shares. Such a move, Icahn insisted, would lift Apple’s share price from $487 to $625 (and, others noted, net the raider a $280 million capital gain48). It was a classic Impulse Society move: Icahn has no expertise in computer technology or organizational structure, or any of the things that go into true innovation.


pages: 318 words: 77,223

The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse by Mohamed A. El-Erian

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activist fund / activist shareholder / activist investor, Airbnb, balance sheet recession, bank run, barriers to entry, break the buck, Bretton Woods, British Empire, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, collapse of Lehman Brothers, corporate governance, currency peg, Erik Brynjolfsson, eurozone crisis, financial innovation, Financial Instability Hypothesis, financial intermediation, financial repression, fixed income, Flash crash, forward guidance, friendly fire, full employment, future of work, Hyman Minsky, If something cannot go on forever, it will stop - Herbert Stein's Law, income inequality, inflation targeting, Jeff Bezos, Kenneth Rogoff, Khan Academy, liquidity trap, Martin Wolf, megacity, Mexican peso crisis / tequila crisis, moral hazard, mortgage debt, Norman Mailer, oil shale / tar sands, price stability, principal–agent problem, quantitative easing, risk tolerance, risk-adjusted returns, risk/return, Second Machine Age, secular stagnation, sharing economy, sovereign wealth fund, The Great Moderation, The Wisdom of Crowds, too big to fail, University of East Anglia, yield curve, zero-sum game

Quoting the S&P estimate of more than $900 billion in U.S. dividends and buybacks for 2014, the letter acknowledges that companies face a “business ecosystem [that] has evolved significantly and presents a daunting challenge for companies working to resist short-term market pressures”—this at a time when S&P expected further increases in both dividends and buybacks. Specifically, dividends were projected to maintain their double-digit growth of the last four years, with a similar growth rate for buybacks.3 Larry Fink correctly noted that pressures on companies come from many directions, including “the proliferation of activist shareholders seeking immediate returns, the ever increasing velocity of capital, a media landscape defined by the 24/7 news cycle and a shrinking attention span, and public policy that fails to encourage truly long-term investment.” Notwithstanding this rather daunting list, Larry Fink urges corporate leaders to reverse the resulting “underinvesting in innovation, skilled workforces or essential capital expenditures necessary to sustain long-term growth.”

In the real world, however, it has taken an unusually long time since the financial crisis for such activity to ramp up, and when activity did pick up, the moves being made initially were largely defensive—that is, companies sought to consolidate costs and reduce competition rather than expand aggressively. Coming out of the financial crisis, companies opted to retain earnings and build up a cash cushion, minimizing the chance of being traumatized again by the market grinding to a halt. But with the growing reality of activist investors—that is, financial investors that use various instruments to place considerable pressure on managements and boards to change—it became only a matter of time until money started flowing back to shareholders through share buybacks and higher dividend payments. While in some cases this resulted in better outcomes, in others it forced companies to manage more intensively to short-term pressures rather than longer-term business interests.


pages: 423 words: 118,002

The Boom: How Fracking Ignited the American Energy Revolution and Changed the World by Russell Gold

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accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, American energy revolution, Bakken shale, Bernie Sanders, Buckminster Fuller, clean water, corporate governance, corporate raider, energy security, energy transition, hydraulic fracturing, Intergovernmental Panel on Climate Change (IPCC), margin call, market fundamentalism, Mason jar, North Sea oil, oil shale / tar sands, oil shock, peak oil, Project Plowshare, risk tolerance, Ronald Reagan, shareholder value, Silicon Valley, Upton Sinclair

Before they took us to the subterranean bunker, a smiling Chesapeake official asked me to sign a form that said I would be removed from the property if I attempted to wander about and interview shareholders or employees. I would not be allowed to grab lunch at one of the company’s three on-site restaurants, which a video screen advertised were serving pan-seared Pacific red snapper in a blood-orange beurre blanc sauce with roasted Japanese eggplant. McClendon was under siege, his leadership and personal finances attacked by activist shareholders. They believed that the assets he had built, leases to drill on millions of acres above US shales and trillions of cubic feet of natural gas, were worth more in the hands of someone else. He had relentlessly—and, some argued, recklessly—created the preeminent shale energy company in the world. Now his hold on the corner suite was tenuous. Shortly after the meeting began at ten o’clock, McClendon took the stage to applause.

The new Chesapeake, he went on, would be “simpler . . . we have what we own, and we are happy with what we own.” At the end of his short remarks, he mentioned the public drubbing his handpicked board members had just received, saying, “We will be studying the results of the vote today and see what else needs to be done.” After he spoke, Vincent Intrieri took the microphone. He worked for Carl Icahn, a well-known activist investor with a reputation for acquiring shares in a company and forcing change. Icahn had been buying Chesapeake shares for several weeks. Intrieri was in his midfifties. He wore an expensive suit and eyeglasses, the uniform of a powerful capitalist. “We believe Aubrey that you are a great oil and gas man,” he said, “but even great leaders need oversight.” The new board of directors, he said, should keep an open mind and consider a potential sale of the entire company.


pages: 586 words: 159,901

Wall Street: How It Works And for Whom by Doug Henwood

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accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, affirmative action, Andrei Shleifer, asset allocation, asset-backed security, bank run, banking crisis, barriers to entry, borderless world, Bretton Woods, British Empire, capital asset pricing model, capital controls, central bank independence, computerized trading, corporate governance, corporate raider, correlation coefficient, correlation does not imply causation, credit crunch, currency manipulation / currency intervention, David Ricardo: comparative advantage, debt deflation, declining real wages, deindustrialization, dematerialisation, diversification, diversified portfolio, Donald Trump, equity premium, Eugene Fama: efficient market hypothesis, experimental subject, facts on the ground, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, George Akerlof, George Gilder, hiring and firing, Hyman Minsky, implied volatility, index arbitrage, index fund, information asymmetry, interest rate swap, Internet Archive, invisible hand, Irwin Jacobs, Isaac Newton, joint-stock company, Joseph Schumpeter, kremlinology, labor-force participation, late capitalism, law of one price, liberal capitalism, liquidationism / Banker’s doctrine / the Treasury view, London Interbank Offered Rate, Louis Bachelier, market bubble, Mexican peso crisis / tequila crisis, microcredit, minimum wage unemployment, money market fund, moral hazard, mortgage debt, mortgage tax deduction, Myron Scholes, oil shock, Paul Samuelson, payday loans, pension reform, Plutocrats, plutocrats, price mechanism, price stability, prisoner's dilemma, profit maximization, publication bias, Ralph Nader, random walk, reserve currency, Richard Thaler, risk tolerance, Robert Gordon, Robert Shiller, Robert Shiller, selection bias, shareholder value, short selling, Slavoj Žižek, South Sea Bubble, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Market for Lemons, The Nature of the Firm, The Predators' Ball, The Wealth of Nations by Adam Smith, transaction costs, transcontinental railway, women in the workforce, yield curve, zero-coupon bond

As Charles Wohlstetter (1993), former chair of Contel, put it, "In sum, we have a group of people with increasing control of the Fortune 500 who have no proven skills in management, no experience at selecting directors, no believable judgment in how much should be spent for research or marketing — in fact, no experience except that which they have accumulated controlling other people's money." Pension funds are the least regulated of the major institutional investors, which is one reason they've been active in the shareholder rebellion, but this makes them accountable on none but purely financial measures. So rather than solving the agency problem, activist shareholding simply adds another layer of potential irresponsibility. And what do they really have to contribute? The best periods of U.S. economic growth have occurred when managers ran corporations and shareholders kept their mouths shut. Admittedly there's a chicken-egg problem here; it's no accident that Berle and Means' book came out during the Depression, that governance issues receded during the Golden Age, and that they returned as economic performance deteriorated in the 1970s.

Mutual funds have also shied away from governance issues; Fidelity, it's said by someone in the know, tried it and withdrew because of bad press, but the company didn't return phone calls asking for comment. Firms like mutual funds with highly visible public images don't want to get caught up in public controversies. But it's highly likely that many of the nonparticipating institutions are happy to have the activist funds in the lead, doing their work for them; they get the benefit of higher share prices without having to take the trouble, or risk their public image by pushing a controversial agenda. shareholders — who needs them? Just because Wall Street's short-termism is a cliche doesn't mean it isn't true. In surveys, CEOs and corporate investor relations managers repeatedly complain of pressure from money managers and Wall Street analysts to produce quick profit grov^h.


pages: 504 words: 139,137

Efficiently Inefficient: How Smart Money Invests and Market Prices Are Determined by Lasse Heje Pedersen

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activist fund / activist shareholder / activist investor, algorithmic trading, Andrei Shleifer, asset allocation, backtesting, bank run, banking crisis, barriers to entry, Black-Scholes formula, Brownian motion, buy low sell high, capital asset pricing model, commodity trading advisor, conceptual framework, corporate governance, credit crunch, Credit Default Swap, currency peg, David Ricardo: comparative advantage, declining real wages, discounted cash flows, diversification, diversified portfolio, Emanuel Derman, equity premium, Eugene Fama: efficient market hypothesis, fixed income, Flash crash, floating exchange rates, frictionless, frictionless market, Gordon Gekko, implied volatility, index arbitrage, index fund, interest rate swap, late capitalism, law of one price, Long Term Capital Management, margin call, market clearing, market design, market friction, merger arbitrage, money market fund, mortgage debt, Myron Scholes, New Journalism, paper trading, passive investing, price discovery process, price stability, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, random walk, Renaissance Technologies, Richard Thaler, risk-adjusted returns, risk/return, Robert Shiller, Robert Shiller, selection bias, shareholder value, Sharpe ratio, short selling, sovereign wealth fund, statistical arbitrage, statistical model, survivorship bias, systematic trading, technology bubble, time value of money, total factor productivity, transaction costs, value at risk, Vanguard fund, yield curve, zero-coupon bond

., creating their own catalyst. 7.5. ACTIVIST INVESTING Another way to create a catalyst is to engage actively in a discussion with the firm’s board, as activist investors do. Activist investing means buying shares in a company that could be worth more with better management and then trying to affect the decisions of the firm. When an investor has bought more than 5% of the shares in a U.S. stock, he must make a so-called “13D filing,” where he reports his position size and declares whether he intends to be active. The mere presence of an activist investor can send a message to management to get their act together. Furthermore, the activist investor may make specific suggestions to the management or board, e.g., by sending a letter suggesting a replacement of the management, changing certain board members, giving cash back to shareholders, cutting costs, or selling assets that are worth more elsewhere and focusing on the remaining firm.

For example, figure 9.8 shows the price discount of BMW’s preference shares relative to the regular shares, a discount that varies over time and has been large for long time periods. Trading on the spread across share classes is not a perfect arbitrage, not just because the spread can widen but also because corporate events can lead to a different treatment of the different share classes. For instance, an activist investor might propose corporate actions that affect the share classes differently, e.g., differential share repurchases. On the other hand, many corporate events can also lead to a collapse of the spread, e.g., this may happen if the company is taken over. Figure 9.8. The price discount of BMW preference shares relative to the ordinary shares. Efficiently Inefficient Arbitrage Spreads: The Case of Twin Stocks Stat arb traders trade on the discrepancy between twin stocks.


pages: 172 words: 46,104

Television Is the New Television: The Unexpected Triumph of Old Media in the Digital Age by Michael Wolff

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activist fund / activist shareholder / activist investor, barriers to entry, commoditize, creative destruction, disintermediation, hiring and firing, Joseph Schumpeter, Marc Andreessen, Mark Zuckerberg, Marshall McLuhan, Silicon Valley, Steve Jobs, telemarketer, the medium is the message, zero-sum game

At some point, too, Yahoo and the other traffic portals came in this sense of pointlessness to resemble media companies at their most hyperbolic worst—television at its emptiest—turning into parodies of hierarchical corporate pass-the-buck protect-your-ass bureaucracies. The open Web had become its opposite, with behavior, values, and levels of deadwood and phony-baloney jobs—and corporate-speak so deep and intense that outsiders doubled over in laughter—resembling nothing so much as the kind of companies that were regularly assaulted for being brain-dead in the 1980s and taken over by opportunistic raiders. In 2012, the raider—or “activist investor”—Dan Loeb took a stake in Yahoo, and, with hardly any resistance, gained a dominant voice on the Yahoo board. Old-line software executive Carol Bartz, appointed Yahoo’s chief in 2009, was dismissed in 2011 and replaced by Scott Thompson, who after Loeb accused him of fabricating details on his résumé was fired a few months later. Thompson was in turn replaced by the company’s number two, Ross Levinsohn, an advertising and media executive (Saatchi & Saatchi, HBO) who had become a leading media-tech crossover executive.

However, this fear forced channels to wean themselves off ad revenue. More surprisingly, as channels began to rely on fees from cable companies, those same cable companies came to control the Internet. Viacom, in 2005, divided itself in two, one part a mostly cable programming company, retaining the Viacom name, and then the other part, a new independent CBS, a mostly network broadcaster. Time Warner, after an assault by activist investor Carl Icahn in 2006, spun off its cable system, TWC (completed in 2009). Comcast, in 2009, bought NBC Universal, a content company. Each of these moves suggests doubt about a fundamental direction of the business and is, in some fashion, a circling-the-wagons move. Viacom, in part believing the Internet view that advertising will more and more migrate to digital form, pushes off CBS, its still entirely ad-supported broadcaster, in the hopes that, no longer competing with its cable channel brothers at Viacom (MTV, Comedy Central, Nickelodeon, etc.)


pages: 244 words: 79,044

Money Mavericks: Confessions of a Hedge Fund Manager by Lars Kroijer

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activist fund / activist shareholder / activist investor, Bernie Madoff, capital asset pricing model, corporate raider, diversification, diversified portfolio, family office, fixed income, forensic accounting, Gordon Gekko, hiring and firing, implied volatility, index fund, intangible asset, Jeff Bezos, Just-in-time delivery, Long Term Capital Management, merger arbitrage, new economy, Ponzi scheme, risk-adjusted returns, risk/return, shareholder value, Silicon Valley, six sigma, statistical arbitrage, Vanguard fund, zero-coupon bond

To Puk, Anna and Sofia – my three girls Contents About the author Acknowledgements About the second edition Introduction Part One Getting ready for Holte Capital 1 Becoming a hedgie 2 Taking the plunge 3 Starting a hedge fund 4 On the road 5 Limping to launch Part Two Becoming the real deal 6 Mickey Mouse fund 7 Breaking through 8 Scaling up and meeting the Godfather 9 The real deal 10 Being corporate 11 Activist investor 12 A day in the life Part Three On the front line 13 Getting fully examined 14 Blood in the streets 15 Edge 16 Made it? 17 Friends and competition 18 Making your commissions count 19 Are we worth it? Part Four The fast road down 20 Feeling grim 21 A bad day 22 A bad run 23 Going home 24 Rethinking Holte Capital Beyond hedge funds – portfolio tips for amateurs Index Acknowledgements As a first time author I probably needed more help than the journalists and professors that often write about finance, and I am thrilled that such an insightful and helpful group of people helped me to finish the book.

Whenever we performed poorly in bad markets we thus had the double failing of doing poorly and also failing to provide our investors with the protection they had counted on us for. If you had a bad month while other hedge funds did well, you generally felt crap about yourself; and it was a whole month before you could send out an investor letter with a new number. With the weight of a bad monthly return hanging over you, the pressure to shine was even greater. 11 * * * Activist investor The no-BS rule If there was one thing I always enjoyed about small financial shops like Holte Capital, it was the complete absence of internal politics. Compared with Lazard Frères, where even 22-year-old analysts like me quickly learned they had to navigate the office minefield to find the best deals to work on, my hedge-fund experience was simple. If we found meetings a waste of time, we would stop having them.


pages: 304 words: 80,965

What They Do With Your Money: How the Financial System Fails Us, and How to Fix It by Stephen Davis, Jon Lukomnik, David Pitt-Watson

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activist fund / activist shareholder / activist investor, Admiral Zheng, banking crisis, Basel III, Bernie Madoff, Black Swan, centralized clearinghouse, clean water, computerized trading, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, crowdsourcing, David Brooks, Dissolution of the Soviet Union, diversification, diversified portfolio, en.wikipedia.org, financial innovation, financial intermediation, fixed income, Flash crash, income inequality, index fund, information asymmetry, invisible hand, Kenneth Arrow, light touch regulation, London Whale, Long Term Capital Management, moral hazard, Myron Scholes, Northern Rock, passive investing, performance metric, Ponzi scheme, principal–agent problem, rent-seeking, Ronald Coase, shareholder value, Silicon Valley, South Sea Bubble, sovereign wealth fund, statistical model, Steve Jobs, the market place, The Wealth of Nations by Adam Smith, transaction costs, Upton Sinclair, value at risk, WikiLeaks

A passenger took a run-of-the-mill complaint about a musical instrument damaged in a baggage transfer and turned it into a YouTube video called “United Breaks Guitars.”39 The company was caught flat-footed when the video went viral, exacting a nasty reputation hit. Investors have joined in too, though less often. Yahoo! saw perhaps the best-known example in 2007 when Eric Jackson, a retail investor with a handful of shares, stirred a large-scale shareowner revolt through his Breakout Performance social media campaign. The activist investor Carl Icahn started using Twitter in June 2013 as part of a battle over the Dell buyout and quickly gained 76,000 followers.40 Then there is retail shareholder David Webb, in Hong Kong, who writes a blog from his home flat. People feed him tips about insider corporate wrongdoing that could never appear in Hong Kong’s mainstream media, because they are controlled by either the state or major families.

In the United Kingdom, for example, it was RBS, which had embarked on rapid acquisition, and HBOS and Northern Rock, which had been aggressive in the market place, who found themselves in greatest trouble. 32. “Governing Banks” (Global Governance Forum/International Finance Corporation, 2010). 33. Upton Sinclair, “I, Candidate for Governor: And How I Got Licked” (University of California Press, 1994). (Originally printed 1936.) 34. Ronald J. Gilson and Jeffrey N. Gordon, “The Agency Costs of Agency Capitalism: Activist Investors and the Revaluation of Governance Rights,” March 11, 2013, Columbia Law Review, 2013, ECGI—Law Working Paper no. 197, Columbia Law and Economics Working Paper no. 438, Rock Center for Corporate Governance at Stanford University Working Paper no. 130, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2206391. 35. “Tom Jones to Keep Citigroup Fund Unit on Song,” Financial Times, June 16, 2003. 36.


pages: 459 words: 118,959

Confidence Game: How a Hedge Fund Manager Called Wall Street's Bluff by Christine S. Richard

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activist fund / activist shareholder / activist investor, Asian financial crisis, asset-backed security, banking crisis, Bernie Madoff, cognitive dissonance, collateralized debt obligation, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Donald Trump, family office, financial innovation, fixed income, forensic accounting, glass ceiling, Long Term Capital Management, market bubble, money market fund, moral hazard, old-boy network, Ponzi scheme, profit motive, short selling, statistical model, white flight, zero-sum game

Several months later, White returned home to North Carolina and found a box had arrived from New York in his absence. It was from Ackman and filled with books: Graham and Dodd’s Security Analysis, Peter Lynch’s One Up on Wall Street, Benjamin Graham’s Intelligent Investor, Lawrence Cunningham’s The Essays of Warren Buffett, and Thornton O’glove’s Quality of Earnings. These were Ackman’s favorite books on investing, and he wanted White to read them all. Ackman made his reputation on Wall Street as an activist investor, a high-profile role that requires a knack for showmanship. But those who know Ackman well say he is an analyst at heart. “He is the smartest analyst I’ve ever met,” says Rafael Mayer, managing director of Khronos LLC, a family office and fund of funds investor, and a friend of Ackman’s. “He looks at something and he just decomposes it.” That process began with questions, lots of questions, including the one Ackman had badgered White with so many times while they were fishing: “Why?”

He helped Ackman organize vast amounts of material for presentations to regulators and rating companies. Despite all of Ackman’s efforts, “the court of public opinion just wasn’t ruling on MBIA,” Bernstein says. When Bernstein met friends after work for drinks, they asked him what Pershing investments he was working on. He could never tell them that he’d been assigned to work on the profitable ones, the ones that were catapulting Ackman into the news as a successful activist investor. Bernstein recalls a few friends who worked for funds of funds, which invest in hedge funds, sharing their bosses’ views on Ackman: “It’s the MBIA obsession; that’s why our fund isn’t investing with Pershing Square,” they told Bernstein. The consensus on Ackman and his persistence about MBIA was that he was either “a genius or a lunatic,” says Bernstein. Rafael Mayer, an early investor in Pershing Square, says that Ackman’s drive to bring people around to his way of thinking can backfire.

Chapter Nineteen Ratings Revisited To keep the music playing required increasingly egregious excesses—ever greater quantities of increasingly risky loans, structures and leveraging —DOUG NOLAND, DAVID TICE & ASSOCIATES, DECEMBER 2007 IN DECEMBER 2007, Bill Ackman went door to door with his presentation on the bond insurers, launching perhaps the most aggressive “short” campaign in the history of Wall Street. Activist investors typically buy a stake in a company and then pressure management to make changes that will drive up the stock price. Short selling and activism are a much more complex pairing. An activist can’t exactly advocate for changes that will cause the company’s share price to collapse or cause it to file for bankruptcy. At least not very often. Ackman, however, saw his short position in MBIA as a cause.


pages: 193 words: 11,060

Ethics in Investment Banking by John N. Reynolds, Edmund Newell

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accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, banking crisis, capital controls, collapse of Lehman Brothers, corporate governance, corporate social responsibility, credit crunch, Credit Default Swap, discounted cash flows, financial independence, index fund, invisible hand, light touch regulation, margin call, moral hazard, Nick Leeson, Northern Rock, quantitative easing, shareholder value, short selling, South Sea Bubble, stem cell, the market place, The Wealth of Nations by Adam Smith, too big to fail, zero-sum game

Shareholders rightly exercise influence over the companies they invest in, and on their boards. At times, shareholders can put pressure on company boards and executives to take increased risks. Shareholder support – or the lack of it – for companies has clearly affected the behaviour of some banks and investment banks, but such pressure is not always farsighted. In 2007, there was extensive external pressure on HSBC to reform its activities, including pressure from activist shareholders. It became clear from late 2007 onwards, as the financial crisis developed, that while HSBC had eschewed some short-term opportunities for profits, despite highprofile exposure to sub-prime loans in the US, its shareholder value had been more effectively stewarded than that of many other UK and global banks. Institutional shareholders have demanded high returns from commercial banking, potentially higher than could be sustained in the long term from a quasi-utility activity.


pages: 257 words: 71,686

Swimming With Sharks: My Journey into the World of the Bankers by Joris Luyendijk

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activist fund / activist shareholder / activist investor, bank run, barriers to entry, Bonfire of the Vanities, bonus culture, collapse of Lehman Brothers, collective bargaining, corporate raider, credit crunch, Credit Default Swap, Emanuel Derman, financial deregulation, financial independence, Flash crash, glass ceiling, Gordon Gekko, high net worth, hiring and firing, information asymmetry, inventory management, job-hopping, light touch regulation, London Whale, Nick Leeson, offshore financial centre, regulatory arbitrage, Satyajit Das, selection bias, shareholder value, sovereign wealth fund, the payments system, too big to fail

The question often came with a cynical laugh as if nothing genuinely serious was at stake; they seemed to anticipate my answer would be ‘greed’, ‘cocaine’ or ‘arrogance’. Many referred to the Gordon Gekko character from the iconic 1987 film Wall Street and his famous quote: ‘Greed, for want of a better word, is good.’ I would resist pointing out that Gordon Gekko was not a banker but a ‘corporate raider’ or ‘activist shareholder’ taking over companies against their will, and instead I’d tell them how some of the things I’d learnt about bankers had ‘lightning-bolted me off my horse’, as the Flemish expression goes. I had had no idea just how much damage the financial sector can do to society let alone how terrifyingly close to the brink we were in 2008. However, what had struck me even more is how such organisations continue to be governed by a system of incentives that seem almost designed to encourage short-termism.


pages: 353 words: 81,436

Buying Time: The Delayed Crisis of Democratic Capitalism by Wolfgang Streeck

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activist fund / activist shareholder / activist investor, banking crisis, basic income, Bretton Woods, capital controls, Carmen Reinhart, central bank independence, collective bargaining, corporate governance, creative destruction, David Graeber, deindustrialization, Deng Xiaoping, Eugene Fama: efficient market hypothesis, financial deregulation, financial repression, fixed income, full employment, Gini coefficient, Growth in a Time of Debt, income inequality, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, labour market flexibility, labour mobility, late capitalism, liberal capitalism, means of production, moral hazard, Myron Scholes, Occupy movement, open borders, open economy, Plutonomy: Buying Luxury, Explaining Global Imbalances, profit maximization, risk tolerance, shareholder value, too big to fail, union organizing, winner-take-all economy, Wolfgang Streeck

As a result lenders seek far more than in the past to protect their claims by exerting influence on government policies. In the debt state, therefore, a second category of stakeholders appears alongside the citizens who, in the democratic tax state and established political theory, constituted the only reference group of the modern state. The rise of creditors to become the second ‘constituency’62 of the modern state is strikingly reminiscent of the emergence of activist shareholders in the corporate world under the ‘shareholder value’ doctrine of the 1980s and 1990s.63 Like the boards of publicly listed companies in relation to the new ‘markets for corporate control’, the governments of today’s debt states in their relationship with the ‘financial markets’ are forced to serve a further set of interests whose claims have suddenly increased because of their greater capacity to assert themselves in more liquid financial markets.


pages: 160 words: 6,876

Shaky Ground: The Strange Saga of the U.S. Mortgage Giants by Bethany McLean

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activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, collateralized debt obligation, housing crisis, mortgage debt, negative equity, obamacare, race to the bottom

Some investors say that they view the lawsuits merely as a wedge to force the door open to what they really want: a recapitalized, albeit heavily reformed, version of Fannie and Freddie, which, they argue, is the right solution for the housing market—as well as one that would increase the value of their stock. This, of course, is precisely what the Administration has said it does not want. In the spring of 2014, the hedge fund manager and activist investor Bill Ackman announced that his fund, Pershing Square, had bought 13 percent of the remaining 20 percent of the GSEs’ common stock. Pershing Square also sued the government. But the purchase of common stock is essentially an all-in bet that Fannie and Freddie will be revitalized in some way. In a presentation he called “It’s Time to Get O≠ Our Fannie,” Ackman laid out a plan for the future of the housing finance system, essentially calling for the return of Fannie and Freddie.


pages: 250 words: 88,762

The Logic of Life: The Rational Economics of an Irrational World by Tim Harford

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activist fund / activist shareholder / activist investor, affirmative action, Albert Einstein, Andrei Shleifer, barriers to entry, Berlin Wall, colonial rule, Daniel Kahneman / Amos Tversky, double entry bookkeeping, Edward Glaeser, en.wikipedia.org, endowment effect, European colonialism, experimental economics, experimental subject, George Akerlof, income per capita, invention of the telephone, Jane Jacobs, John von Neumann, law of one price, Martin Wolf, mutually assured destruction, New Economic Geography, new economy, Plutocrats, plutocrats, Richard Florida, Richard Thaler, Ronald Reagan, Silicon Valley, spinning jenny, Steve Jobs, The Death and Life of Great American Cities, the market place, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Malthus, women in the workforce, zero-sum game

Collectively the CEOs are taking five hundred dollars from me, but I can’t pursue them collectively, I can only try to beat them up one at a time. And I’m only one shareholder—how much effort am I really going to put into contacting my fellow shareholders and trying to persuade them to vote down the board? Actually, the situation is worse than that: It’s a game of split the check inside a second game of split the check, because even if I and my fellow activist shareholders do manage to get together and rein in an overly generous board, the immediate result is likely to be a damaging succession crisis at the company. Shareholders of other companies will benefit because other boards will look over their shoulders at our little shareholder revolution and tighten their belts just a little. But we brave revolutionaries are likely to be out of pocket for our pains.


pages: 281 words: 95,852

The Googlization of Everything: by Siva Vaidhyanathan

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1960s counterculture, activist fund / activist shareholder / activist investor, AltaVista, barriers to entry, Berlin Wall, borderless world, Burning Man, Cass Sunstein, choice architecture, cloud computing, computer age, corporate social responsibility, correlation does not imply causation, creative destruction, data acquisition, death of newspapers, don't be evil, Firefox, Francis Fukuyama: the end of history, full text search, global village, Google Earth, Howard Rheingold, informal economy, information retrieval, John Markoff, Joseph Schumpeter, Kevin Kelly, knowledge worker, libertarian paternalism, market fundamentalism, Marshall McLuhan, means of production, Mikhail Gorbachev, moral panic, Naomi Klein, Network effects, new economy, Nicholas Carr, PageRank, pirate software, Ray Kurzweil, Richard Thaler, Ronald Reagan, side project, Silicon Valley, Silicon Valley ideology, single-payer health, Skype, social web, Steven Levy, Stewart Brand, technoutopianism, The Nature of the Firm, The Structural Transformation of the Public Sphere, Thorstein Veblen, urban decay, web application, zero-sum game

So when Yahoo revealed his e-mail account information to Chinese authorities, they were able to track Shi as the source of the offending e-mail. Shi was sentenced to ten years in prison in April 2005.30 Once word reached the United States that Yahoo was complicit in the persecution of political dissidents, a furor ensued. Yahoo has faced a lawsuit filed by human rights organizations, widespread criticism among bloggers and activists, shareholder objections, and a grilling by a U.S. congressional committee examining the roles of American companies such as Yahoo, Cisco (which supplies the servers that facilitate much of the surveillance and site blocking in China), and Google. Yahoo, of course, defended its actions by saying that it cannot violate the laws of a country in which it does business, and it cannot be held responsible if its users violate laws.


pages: 376 words: 109,092

Paper Promises by Philip Coggan

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accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, balance sheet recession, bank run, banking crisis, barriers to entry, Berlin Wall, Bernie Madoff, Black Swan, Bretton Woods, British Empire, call centre, capital controls, Carmen Reinhart, carried interest, Celtic Tiger, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, debt deflation, delayed gratification, diversified portfolio, eurozone crisis, Fall of the Berlin Wall, falling living standards, fear of failure, financial innovation, financial repression, fixed income, floating exchange rates, full employment, German hyperinflation, global reserve currency, hiring and firing, Hyman Minsky, income inequality, inflation targeting, Isaac Newton, John Meriwether, joint-stock company, Kenneth Rogoff, labour market flexibility, light touch regulation, Long Term Capital Management, manufacturing employment, market bubble, market clearing, Martin Wolf, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, Myron Scholes, negative equity, Nick Leeson, Northern Rock, oil shale / tar sands, paradox of thrift, peak oil, pension reform, Plutocrats, plutocrats, Ponzi scheme, price stability, principal–agent problem, purchasing power parity, quantitative easing, QWERTY keyboard, railway mania, regulatory arbitrage, reserve currency, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, time value of money, too big to fail, trade route, tulip mania, value at risk, Washington Consensus, women in the workforce, zero-sum game

The low level of short-term interest rates and of government bond yields encouraged this tendency – hedge funds needed to buy higher-yielding assets if they were going to offset their fees. For the borrowers, keeping a cash hoard was no longer in fashion. Indeed companies were criticized for holding ‘idle’ cash. Academics argued that companies should put the money to work, by making acquisitions or investing in new factories, or they should return it to shareholders who could then invest the money in a company with more attractive growth potential. Activist shareholders often demanded that executives should adopt such policies. In theory, companies could finance themselves entirely with equity (cash raised from shareholders who would never be repaid), with debt, or with some combination of the two. The academics suggested that, other things being equal, the exact mix was irrelevant to the value of a company. That value is determined by the cashflows generated.


pages: 366 words: 94,209

Throwing Rocks at the Google Bus: How Growth Became the Enemy of Prosperity by Douglas Rushkoff

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3D printing, activist fund / activist shareholder / activist investor, Airbnb, algorithmic trading, Amazon Mechanical Turk, Andrew Keen, bank run, banking crisis, barriers to entry, bitcoin, blockchain, Burning Man, business process, buy low sell high, California gold rush, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, centralized clearinghouse, citizen journalism, clean water, cloud computing, collaborative economy, collective bargaining, colonial exploitation, Community Supported Agriculture, corporate personhood, corporate raider, creative destruction, crowdsourcing, cryptocurrency, disintermediation, diversified portfolio, Elon Musk, Erik Brynjolfsson, ethereum blockchain, fiat currency, Firefox, Flash crash, full employment, future of work, gig economy, Gini coefficient, global supply chain, global village, Google bus, Howard Rheingold, IBM and the Holocaust, impulse control, income inequality, index fund, iterative process, Jaron Lanier, Jeff Bezos, jimmy wales, job automation, Joseph Schumpeter, Kickstarter, loss aversion, Lyft, Marc Andreessen, Mark Zuckerberg, market bubble, market fundamentalism, Marshall McLuhan, means of production, medical bankruptcy, minimum viable product, Naomi Klein, Network effects, new economy, Norbert Wiener, Oculus Rift, passive investing, payday loans, peer-to-peer lending, Peter Thiel, post-industrial society, profit motive, quantitative easing, race to the bottom, recommendation engine, reserve currency, RFID, Richard Stallman, ride hailing / ride sharing, Ronald Reagan, Satoshi Nakamoto, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Snapchat, social graph, software patent, Steve Jobs, TaskRabbit, The Future of Employment, trade route, transportation-network company, Turing test, Uber and Lyft, Uber for X, unpaid internship, Y Combinator, young professional, zero-sum game, Zipcar

The investments generated jobs, goodwill, and homes, in addition to retirement fund returns for union members.75 Individuals can apply the same principles to their own investments by considering how to leverage the impact of their capital to benefit their own lives. It’s easiest to see and feel that impact by investing in regional companies and projects, big or small. A large corporation’s local activist shareholders can have a disproportionately significant influence on how the company employs, sources, pollutes, and donates. Meanwhile, as distributed technologies allow smaller, more locally connected businesses to leverage people, assets, and trends that larger conglomerates cannot, consider putting your capital right there. Do you want a local bookstore, gym, or Thai restaurant? Invest in one. Yes, business partnerships between local merchants and friends are stickier than the anonymous purchase of stocks through a laptop, but that’s also what makes them better.


pages: 1,009 words: 329,520

The Last Tycoons: The Secret History of Lazard Frères & Co. by William D. Cohan

activist fund / activist shareholder / activist investor, bank run, carried interest, cognitive dissonance, commoditize, computer age, corporate governance, corporate raider, creative destruction, credit crunch, diversification, Donald Trump, East Village, fear of failure, fixed income, hiring and firing, interest rate swap, intermodal, Joseph Schumpeter, late fees, Long Term Capital Management, Marc Andreessen, market bubble, offshore financial centre, Ponzi scheme, Ralph Nader, Ralph Waldo Emerson, rolodex, Ronald Reagan, shareholder value, The Nature of the Firm, the new new thing, Yogi Berra

This rather straightforward warning shot from Michel came a day before the scheduled board meetings to approve the $3.2 billion merger between two of Lazard's cascade of holding companies, Eurazeo and Rue Imperiale, which had been announced in November 2003. The merger was the final step in a four-year process designed to simplify Lazard's byzantine ownership structure and came about chiefly as a result of the ongoing efforts of Jon Wood at UBS, the activist shareholder. After the merger with Rue Imperiale, Eurazeo would become, essentially, a large publicly traded private-equity fund. Together, Michel and the onetime Lazard suitor Credit Agricole would control 54 percent of the voting rights of Eurazeo. Michel had a huge influence on Patrick Sayer, the forty-seven-year-old Eurazeo CEO. He had handpicked the "hyperkinetic" Sayer to be CEO in 2001 after he presided over the withering away of Lazard's media and telecom business in New York, following the burst of the telecom bubble and Rattner's departure to form Quadrangle.

(By early December 2006, TWX was trading close to $20 per share.) Bruce's brief and embarrassing high-profile gambit on Icahn's behalf had revealed just how far the "new Lazard" had strayed from the subtle and powerful shadowy operator that had long comprised the firm's complex genome. "For reasons that remain inexplicable," Andrew Ross Sorkin wrote in the Times after the compromise had been reached, "Mr. Wasserstein assumed the role of activist investor himself." Sorkin then canvassed Wall Street opinion to see how much reputational damage Bruce and Lazard had suffered, especially since only a month before Bruce had told Sorkin he considered himself "the trustee for the future" of Lazard. "Had he won, it would have been a different story," Sorkin discovered. "Mr. Wasserstein would have again proved himself to be the smartest guy in the room and beaten the odds.


pages: 483 words: 141,836

Red-Blooded Risk: The Secret History of Wall Street by Aaron Brown, Eric Kim

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activist fund / activist shareholder / activist investor, Albert Einstein, algorithmic trading, Asian financial crisis, Atul Gawande, backtesting, Basel III, Bayesian statistics, beat the dealer, Benoit Mandelbrot, Bernie Madoff, Black Swan, capital asset pricing model, central bank independence, Checklist Manifesto, corporate governance, creative destruction, credit crunch, Credit Default Swap, disintermediation, distributed generation, diversification, diversified portfolio, Edward Thorp, Emanuel Derman, Eugene Fama: efficient market hypothesis, experimental subject, financial innovation, illegal immigration, implied volatility, index fund, Long Term Capital Management, loss aversion, margin call, market clearing, market fundamentalism, market microstructure, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, Myron Scholes, natural language processing, open economy, Pierre-Simon Laplace, pre–internet, quantitative trading / quantitative finance, random walk, Richard Thaler, risk tolerance, risk-adjusted returns, risk/return, road to serfdom, Robert Shiller, Robert Shiller, shareholder value, Sharpe ratio, special drawing rights, statistical arbitrage, stochastic volatility, The Myth of the Rational Market, Thomas Bayes, too big to fail, transaction costs, value at risk, yield curve

Martin and I planned to get rich by investing in our fund along with other shareholders, not by charging fees to other shareholders. Unfortunately, it took four years to get the idea past the SEC, and I had to go all the way up to the commissioners themselves. I don’t blame them; this idea touched on a lot of hot-button issues. The commissioners and staff were suspicious of a concentrated portfolio, aghast at Internet stock message boards, and nervous about activist investors. But at no time did I run into bureaucratic indifference or rigidity. I had open and productive discussions with many staff members, who also did a ton of free legal work for me. Once we did open, the SEC stood by us on several important occasions, which saved us from being either regulated or sued out of existence. Despite all that help, I do have a tiny twinge of regret that the four-year delay meant the fund opened on March 10, 2000.

I concluded in the end that the Internet investor base made it harder to effect improvements, not easier. I’m not bitter about it. I had a ton of fun and could afford the loss. I met some good people and learned a lot. eRaider.com got a lot of great press, even if people were inclined to put us in stories with an astrologer, a preteen penny stock hyper, and a mutual fund that put a webcam in its trading room. Even more annoying: Every activist investor, regardless of amount of investment or seriousness, is described in every news article as a “gadfly.” Anyway, for the present purposes the eRaider.com story proves that I actually believe this small portfolio stuff. As I said at the beginning of this section, my point is not that the IGT CAPM is better than MPT CAPM, or even whether there’s any truth to it at all. For the record, I think it is a useful way to analyze absolute price levels in less liquid markets, and with some further theoretical and empirical work, it might have broader application, especially to help understand capital flows.


pages: 309 words: 114,984

The Digital Doctor: Hope, Hype, and Harm at the Dawn of Medicine’s Computer Age by Robert Wachter

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activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, AI winter, Airbnb, Atul Gawande, Captain Sullenberger Hudson, Checklist Manifesto, Chuck Templeton: OpenTable, Clayton Christensen, collapse of Lehman Brothers, computer age, creative destruction, crowdsourcing, deskilling, en.wikipedia.org, Erik Brynjolfsson, everywhere but in the productivity statistics, Firefox, Frank Levy and Richard Murnane: The New Division of Labor, Google Glasses, Ignaz Semmelweis: hand washing, Internet of things, job satisfaction, Joseph Schumpeter, knowledge worker, lifelogging, medical malpractice, medical residency, Menlo Park, minimum viable product, natural language processing, Network effects, Nicholas Carr, obamacare, pattern recognition, peer-to-peer, personalized medicine, pets.com, Productivity paradox, Ralph Nader, RAND corporation, Second Machine Age, self-driving car, Silicon Valley, Silicon Valley startup, six sigma, Skype, Snapchat, software as a service, Steve Jobs, Steven Levy, the payments system, The Wisdom of Crowds, Thomas Bayes, Toyota Production System, Uber for X, US Airways Flight 1549, Watson beat the top human players on Jeopardy!, Yogi Berra

Being thwacked by the media for being “closed” is unpleasant, and nobody wants to be publicly excoriated at a congressional hearing. But Epic sales remain brisk, and, at least in its core market, the company continues to receive a steady stream of new customers who are dissatisfied with their current EHRs. Because he runs a publicly traded company, Jonathan Bush is subject to a different kind of pressure than Epic is. In May 2014, activist investor David Einhorn, the billionaire CEO of Greenlight Capital, went after both Bush and athena in a speech at a large investor conference. After observing that athena had an outlandish price/earnings ratio, had failed to meet several financial performance expectations, and faces a series of major business challenges in coming years (the loss of the HITECH money and the lack of a viable inpatient system, to name a couple), Einhorn predicted that athena’s stock would tumble by 80 percent in relatively short order, in a classic bursting of a Wall Street “bubble.”

Penn, “Read David Einhorn’s Brutal Presentation on Athenahealth That Had a Room Full of Investors Laughing Out Loud,” Business Insider, May 7, 2014, available at http://www.businessinsider.com/einhorn-at-sohn-investment-conference-2014-5? op=1. Adams resigned from the company two months after making these comments. 231 In February, 2015, athena and John Halamka’s S. Mace. “Athenahealth, BIDMC Ink Development Deal,” HealthLeaders Media, February 3, 2015. 232 Don Berwick, former head of Medicare Quoted in A. Gawande, “The Velluvial Matrix,” New Yorker, June 16, 2010. 232 In May 2014, activist investor David Einhorn Lopez and Penn, “Read David Einhorn’s Brutal Presentation.” Bush rebutted Einhorn in J. Wieczner, “Bush vs. Einhorn: How athenahealth’s CEO Met His Short-Seller,” Fortune, May 28, 2014. Chapter 25: Silicon Valley Meets Healthcare 235 “For thousands of years, guys like us” “Minimum Viable Product,” Silicon Valley (television series), HBO, 2014. 235 “Our investment convinced the IT world” Interview of David Blumenthal by the author, July 16, 2014. 236 “Health IT Sees First Billion Dollar Quarter” A.


pages: 177 words: 54,421

Ego Is the Enemy by Ryan Holiday

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activist fund / activist shareholder / activist investor, Airbnb, Berlin Wall, Bernie Madoff, Burning Man, delayed gratification, Google Glasses, Jeff Bezos, Lao Tzu, Paul Graham, Ponzi scheme, Ralph Waldo Emerson, Richard Feynman, Richard Feynman, side project, South Sea Bubble, Steve Jobs, Upton Sinclair

At four o’clock one morning came a a frantic call: the union had sabotaged company machinery, beaten up an innocent staffer, and then set one of the printing presses on fire. Typically, during printing strikes competitors will help fellow papers out with their printing but Graham’s competitors refused, costing the Post $300,000 a day in advertising revenue. Then, a suite of major investors began to sell their stock positions in the Washington Post Company, ostensibly having lost their faith in its prospects. Graham, pushed by the activist investor she’d met with earlier, decided her best option was to spend an enormous amount of the company’s money to buy back its own shares on the public markets—a dangerous move that almost no one was doing at the time. That’s a list of problems exhausting to read about let alone live through. Yet because of Graham’s perseverance, it shook out better than anyone could have possibly predicted. The leaked documents Katharine Graham published became known as the Pentagon Papers and were one of the most important stories in the history of journalism.


pages: 263 words: 75,455

Quantitative Value: A Practitioner's Guide to Automating Intelligent Investment and Eliminating Behavioral Errors by Wesley R. Gray, Tobias E. Carlisle

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activist fund / activist shareholder / activist investor, Albert Einstein, Andrei Shleifer, asset allocation, Atul Gawande, backtesting, beat the dealer, Black Swan, capital asset pricing model, Checklist Manifesto, cognitive bias, compound rate of return, corporate governance, correlation coefficient, credit crunch, Daniel Kahneman / Amos Tversky, discounted cash flows, Edward Thorp, Eugene Fama: efficient market hypothesis, forensic accounting, hindsight bias, intangible asset, Louis Bachelier, p-value, passive investing, performance metric, quantitative hedge fund, random walk, Richard Thaler, risk-adjusted returns, Robert Shiller, Robert Shiller, shareholder value, Sharpe ratio, short selling, statistical model, survivorship bias, systematic trading, The Myth of the Rational Market, time value of money, transaction costs

These findings suggest that, on average, the market believes activism creates shareholder value. Most interesting, the market-beating returns do not dissipate in the one-year period following the initialSchedule 13D. Instead, target stocks earn an additional 11.4 percent to 17.8 percent above-market return during the year following the activists' interventions. The market-beating returns may be due to changes in stock operations implemented at the behest of the activist investors (see Table 9.1). TABLE 9.1 One-Year Abnormal Returns and Profitability Changes Following Activism In a 2008 paper, Jerry Martin and John Puthenpurackal16 examine the performance of a hypothetical portfolio that mimics Berkshire Hathaway's investments after they are disclosed to the market. Martin and Puthenpurackal write that Buffett's investment record suggests he is one of the most successful investors of all time, with a stock portfolio in 2007 worth over $50 billion in publicly traded companies whose value would equate to the ninth-largest equity mutual fund.


pages: 239 words: 69,496

The Wisdom of Finance: Discovering Humanity in the World of Risk and Return by Mihir Desai

activist fund / activist shareholder / activist investor, Albert Einstein, Andrei Shleifer, assortative mating, Benoit Mandelbrot, Brownian motion, capital asset pricing model, carried interest, collective bargaining, corporate governance, corporate raider, discounted cash flows, diversified portfolio, Eugene Fama: efficient market hypothesis, financial innovation, follow your passion, George Akerlof, Gordon Gekko, greed is good, housing crisis, income inequality, information asymmetry, Isaac Newton, Jony Ive, Kenneth Rogoff, Louis Bachelier, moral hazard, Myron Scholes, new economy, out of africa, Paul Samuelson, Pierre-Simon Laplace, principal–agent problem, Ralph Waldo Emerson, random walk, risk/return, Robert Shiller, Robert Shiller, Ronald Coase, Silicon Valley, Steve Jobs, The Market for Lemons, The Nature of the Firm, The Wealth of Nations by Adam Smith, Tim Cook: Apple, transaction costs, zero-sum game

Venture capitalists, who fund early stage companies, are particularly preoccupied with this problem and, as a result, stage their investments in bite-size portions with curious instruments like “convertible preferred stock.” The peculiarities of these financial practices are designed to facilitate the monitoring of entrepreneurs and to make sure they are pursuing an agenda that is coincident with their investors’ agenda. Alas, these “solutions,” too, have yielded their own problems. Activist investors and short sellers are paid in ways, including contracts that allow them to reap gains over short horizons, that can lead them to place short-term gains over long-term value. Private equity might seem better, but these investors are also paid with similar contracts that provide incentives to harvest investments at particular horizons. And private equity investors often ultimately take their companies public, leading to a set of games they can play because of their informational advantages prior to a public offering.


pages: 1,042 words: 266,547

Security Analysis by Benjamin Graham, David Dodd

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activist fund / activist shareholder / activist investor, asset-backed security, backtesting, barriers to entry, capital asset pricing model, carried interest, collateralized debt obligation, collective bargaining, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, diversified portfolio, fear of failure, financial innovation, fixed income, full employment, index fund, intangible asset, invisible hand, Joseph Schumpeter, locking in a profit, Long Term Capital Management, low cost carrier, moral hazard, mortgage debt, Myron Scholes, p-value, Right to Buy, risk-adjusted returns, risk/return, secular stagnation, shareholder value, The Chicago School, the market place, the scientific method, The Wealth of Nations by Adam Smith, transaction costs, zero-coupon bond

In the present era of aggressive corporate financial engineering, managers have many levers at their disposal to positively impact returns, including share repurchases, prudent use of leverage, and a valuation-based approach to acquisitions. Managers who are unwilling to make shareholder-friendly decisions risk their companies becoming perceived as “value traps”: inexpensively valued, but ultimately poor investments, because the assets are underutilized. Such companies often attract activist investors seeking to unlock this trapped value. Even more difficult, investors must decide whether to take the risk of investing—at any price—with management teams that have not always done right by shareholders. Shares of such companies may sell at steeply discounted levels, but perhaps the discount is warranted; value that today belongs to the equity holders may tomorrow have been spirited away or squandered.

Identifying a company with a big cash stash and the ability to generate more is a great start. But the cash doesn’t do the shareholder any good unless management makes smart investments with it, or returns it to its owners via dividends or share buybacks. Management talent and intentions are crucial. Sometimes there is just too much cash to ignore, even if it is under the control of folks who won’t invest it or distribute it. In those cases activist investors often take large stakes and pressure managers to “unlock the value” in the company; failing that, they try to replace those managers. One way or another, if there’s enough money in the cash register, somebody will find a way to get it out. Chapter 27 THE THEORY OF COMMON- STOCK INVESTMENT Copyright © 2009 by The McGraw-Hill Companies, Inc. Click here for terms of use. IN OUR INTRODUCTORY discussion we set forth the difficulties inherent in efforts to apply the analytical technique to speculative situations.

The first is one in which the asset value of a company exceeds the value of its foreseeable earnings. That tells you the assets are not being used to full advantage by management. Here, the critical factor for value investors is the prospect of some catalyst that will alter either the behavior or identity of current management. Graham and Dodd were aware of this although they were not cognizant of the range of interventions available to activist investors today. A second possibility is that earnings power may exceed the asset value of a company. To maintain those superior profits, there needs to be some economic factors to protect the firm from competition. Today, these factors are referred to as “moats,” franchises, barriers to entry, or competitive advantages. What they look like and how they can be assessed is an essential part of modern income statement analysis.


pages: 892 words: 91,000

Valuation: Measuring and Managing the Value of Companies by Tim Koller, McKinsey, Company Inc., Marc Goedhart, David Wessels, Barbara Schwimmer, Franziska Manoury

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activist fund / activist shareholder / activist investor, air freight, barriers to entry, Basel III, BRICs, business climate, business process, capital asset pricing model, capital controls, Chuck Templeton: OpenTable, cloud computing, commoditize, compound rate of return, conceptual framework, corporate governance, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, discounted cash flows, distributed generation, diversified portfolio, energy security, equity premium, fixed income, index fund, intangible asset, iterative process, Long Term Capital Management, market bubble, market friction, meta analysis, meta-analysis, Myron Scholes, negative equity, new economy, p-value, performance metric, Ponzi scheme, price anchoring, purchasing power parity, quantitative easing, risk/return, Robert Shiller, Robert Shiller, shareholder value, six sigma, sovereign wealth fund, speech recognition, survivorship bias, technology bubble, time value of money, too big to fail, transaction costs, transfer pricing, value at risk, yield curve, zero-coupon bond

For example, VALUE CREATION FROM DIVESTITURES 631 EXHIBIT 28.2 Market-Adjusted Announcement Returns of Divestitures Cumulative abnormal returns measured from 1 day before to 1 day after announcement. All Spin-offs Carve-outs Asset sales Mean, % Median, % 3.0 1.8 4.5 3.6 2.3 0.9 2.6 1.6 Number of transactions 370 106 125 139 Source: J. Mulherin and A. Boone, “Comparing Acquisitions and Divestitures,” Journal of Corporate Finance 6 (2000): 117–139. in September 2013, Timken announced the spin-off of its steel business after an activist-investor campaign. Similarly, in 2014, PepsiCo faced pressure from an activist investor to separate its beverages and food businesses. This chapter first presents the evidence that divestitures create value and the factors that go into creating that value. Then it discusses why executives often shy away from proactively pursuing divestitures, in spite of this evidence. The next section shows how to assess a divestiture’s value-creation potential.

Some executives argue that investors won’t let them focus on the long term; others fault the rise of shareholder activists in particular. Yet our research shows that even if short-term investors cause day-today fluctuations in a company’s share price and dominate quarterly earnings calls, longer-term investors are the ones who align market prices with intrinsic value.15 Moreover, the evidence shows that, on average, activist investors strengthen the long-term health of the companies they pursue—for example, often challenging existing compensation structures that encourage shorttermism.16 Instead, we often find that executives themselves or their boards are usually the source of short-termism. In a 2013 survey of more than 1,000 executives and board members, most cited their own executive teams and boards 12 R. N. Palter, W.


pages: 390 words: 114,538

Digital Wars: Apple, Google, Microsoft and the Battle for the Internet by Charles Arthur

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activist fund / activist shareholder / activist investor, AltaVista, Build a better mousetrap, Burning Man, cloud computing, commoditize, credit crunch, crowdsourcing, disintermediation, don't be evil, en.wikipedia.org, Firefox, gravity well, Jeff Bezos, John Gruber, Mark Zuckerberg, Menlo Park, Network effects, PageRank, pre–internet, Robert X Cringely, Silicon Valley, Silicon Valley startup, skunkworks, Skype, slashdot, Snapchat, software patent, speech recognition, stealth mode startup, Steve Ballmer, Steve Jobs, the new new thing, the scientific method, Tim Cook: Apple, turn-by-turn navigation, upwardly mobile

Microsoft still made its from licensing software (and, increasingly, patents, where the tithes from Android device makers were heading towards $2 billion per year). Apple generated almost all of its revenues from hardware. Google made its money through advertising, largely linked to its search engine. In that sense, none had really changed in 15 years. There were other similarities: only Google retained the same chief executive. Jobs had been replaced by Tim Cook. Ballmer was on his way out, the victim of a board-level putsch led by activist shareholders unhappy that Microsoft’s stock value had barely risen for a decade. His replacement, Satya Nadella, 46, had a background in enterprise and cloud services – and 22 years at the company. The certainties of the past – that the horizontal model must always succeed – were less clear. Android had so far won the battle to be the most-used smartphone platform; though with global use of smartphones estimated at just 20 per cent by the end of 2013 (because there are so many in the developing world which had not yet been catered for) the possibility remained that another ‘open’ OS – such as FirefoxOS, from the Mozilla foundation – could rise up and serve the next few billion buyers.


pages: 91 words: 26,009

Capitalism: A Ghost Story by Arundhati Roy

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activist fund / activist shareholder / activist investor, Bretton Woods, corporate governance, feminist movement, Frank Gehry, ghettoisation, Howard Zinn, informal economy, land reform, Mahatma Gandhi, means of production, megacity, microcredit, neoliberal agenda, Occupy movement, RAND corporation, reserve currency, special economic zone, spectrum auction, stem cell, The Chicago School, Washington Consensus, WikiLeaks

Mischievously, when India’s government or sections of its corporate press want to run a smear campaign against a genuine people’s movement, like the Narmada Bachao Andolan, or the protest against the Koodankulam nuclear reactor, they accuse these movements of being NGOs receiving “foreign funding.” They know very well that the mandate of most NGOs, in particular the well-funded ones, is to further the project of corporate globalization, not thwart it. Armed with their billions, these NGOs have waded into the world, turning potential revolutionaries into salaried activists, funding artists, intellectuals, and filmmakers, gently luring them away from radical confrontation, ushering them in the direction of multiculturalism, gender equity, community development—the discourse couched in the language of identity politics and human rights. The transformation of the idea of justice into the industry of human rights has been a conceptual coup in which NGOs and foundations have played a crucial part.


pages: 284 words: 92,688

Disrupted: My Misadventure in the Start-Up Bubble by Dan Lyons

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activist fund / activist shareholder / activist investor, Airbnb, Bernie Madoff, bitcoin, call centre, cleantech, cloud computing, corporate governance, dumpster diving, fear of failure, Filter Bubble, Golden Gate Park, Google Glasses, Googley, Gordon Gekko, hiring and firing, Jeff Bezos, Lean Startup, Lyft, Marc Andreessen, Mark Zuckerberg, Menlo Park, minimum viable product, new economy, Paul Graham, pre–internet, quantitative easing, ride hailing / ride sharing, Rosa Parks, Sand Hill Road, sharing economy, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, Skype, Snapchat, software as a service, South of Market, San Francisco, Steve Ballmer, Steve Jobs, Steve Wozniak, telemarketer, tulip mania, Y Combinator, éminence grise

Eighteen months after buying Skype, Andreessen and his partners sold the company to Microsoft for $8.5 billion—three times what they paid. To some, Andreessen’s role as both an eBay director and an investor acquiring an asset from eBay seemed like a problem. “Andreessen, he’s screwed more people than Casanova, for Christ’s sake, and yet he goes and takes this attitude that he’s on the high moral ground,” activist investor Carl Icahn said on CNBC. Icahn complained that eBay had sold Skype for less than what it was worth and that eBay’s investors had been shortchanged. Andreessen said Icahn was “making up a fake conspiracy theory out of thin air.” The tech press sided with Andreessen. The story went nowhere. Andreessen is relentlessly optimistic and pounds away on the same message, which is that no matter how high the valuations of start-ups might go, this all makes sense.


pages: 831 words: 98,409

SUPERHUBS: How the Financial Elite and Their Networks Rule Our World by Sandra Navidi

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activist fund / activist shareholder / activist investor, assortative mating, bank run, barriers to entry, Bernie Sanders, Black Swan, Bretton Woods, butterfly effect, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, cognitive bias, collapse of Lehman Brothers, collateralized debt obligation, commoditize, conceptual framework, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, diversification, East Village, Elon Musk, eurozone crisis, family office, financial repression, Gini coefficient, glass ceiling, Goldman Sachs: Vampire Squid, Google bus, Gordon Gekko, haute cuisine, high net worth, hindsight bias, income inequality, index fund, intangible asset, Jaron Lanier, John Meriwether, Kenneth Arrow, Kenneth Rogoff, knowledge economy, London Whale, Long Term Capital Management, Mark Zuckerberg, mass immigration, McMansion, mittelstand, money market fund, Myron Scholes, NetJets, Network effects, offshore financial centre, old-boy network, Parag Khanna, Paul Samuelson, peer-to-peer, performance metric, Peter Thiel, Plutocrats, plutocrats, Ponzi scheme, quantitative easing, Renaissance Technologies, rent-seeking, reserve currency, risk tolerance, Robert Gordon, Robert Shiller, Robert Shiller, rolodex, Satyajit Das, shareholder value, Silicon Valley, sovereign wealth fund, Stephen Hawking, Steve Jobs, The Future of Employment, The Predators' Ball, too big to fail, women in the workforce, young professional

Andrew Clark, “Lehman Brothers’ Golden Girl, Erin Callan: Through the Glass Ceiling—and Off the Glass Cliff,” Guardian, March 19, 2010, http://www.theguardian.com/business/2010/mar/19/lehmans-erin-callan-glass-cliff. 28. Gillian Tett, “Lunch with the FT: Christine Lagarde,” Financial Times, September 12, 2014, http://www.ft.com/intl/cms/s/0/4c506aec-3938-11e4-9526-00144feabdc0.xhtml. 29. Andrew Ross Sorkin, “Do Activist Investors Target Female C.E.O.s?” New York Times, February 9, 2015, http://dealbook.nytimes.com/2015/02/09/the-women-of-the-s-p-500-and-investor-activism. 30. Debora L. Spar, Wonder Women: Sex, Power, and the Quest for Perfection (New York: Farrar, Straus and Giroux, 2013), Kindle locations 3222-25, Kindle edition. 31. Sandberg, Lean In, 71. 32. Ibid., 72. 33. Madison Marriage, “FTfm Survey: Fund Market Rocked by Sexism Claims,” Financial Times, September 8, 2013, http://www.ft.com/intl/cms/s/0/4e57770e-1639-11e3-a57d-00144feabdc0.xhtml. 34.

All About Asset Allocation, Second Edition by Richard Ferri

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activist fund / activist shareholder / activist investor, asset allocation, asset-backed security, barriers to entry, Bernie Madoff, capital controls, commoditize, commodity trading advisor, correlation coefficient, Daniel Kahneman / Amos Tversky, diversification, diversified portfolio, equity premium, estate planning, financial independence, fixed income, full employment, high net worth, Home mortgage interest deduction, implied volatility, index fund, intangible asset, Long Term Capital Management, Mason jar, money market fund, mortgage tax deduction, passive income, pattern recognition, random walk, Richard Thaler, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Robert Shiller, selection bias, Sharpe ratio, survivorship bias, too big to fail, transaction costs, Vanguard fund, yield curve

There are hundreds of arbitrage opportunities that present themselves on a daily basis if CHAPTER 10 208 ● ● you have access to the information and can trade very inexpensively. Event-driven strategies. Event-driven strategies take advantage of corporate transaction announcements and other one-time events. An example would be “distressed securities,” which involve investing in companies that are in or near bankruptcy. Another type of event-driven strategy is an activist fund, which is predatory in nature. The managers of an activist fund take sizable positions in small, flawed companies and then use their influence to force management changes and restructuring. A third type of event-driven fund is venture capital. Venture funds invest in start-up companies. Directional or tactical strategies. The largest group of hedge funds uses directional or tactical strategies. An example of a directional fund is a commodities trading advisor (CTA).


pages: 481 words: 120,693

Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else by Chrystia Freeland

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activist fund / activist shareholder / activist investor, Albert Einstein, algorithmic trading, assortative mating, banking crisis, barriers to entry, Basel III, battle of ideas, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, Branko Milanovic, Bretton Woods, BRICs, business climate, call centre, carried interest, Cass Sunstein, Clayton Christensen, collapse of Lehman Brothers, commoditize, conceptual framework, corporate governance, creative destruction, credit crunch, Credit Default Swap, crony capitalism, Deng Xiaoping, don't be evil, double helix, energy security, estate planning, experimental subject, financial deregulation, financial innovation, Flash crash, Frank Gehry, Gini coefficient, global village, Goldman Sachs: Vampire Squid, Gordon Gekko, Guggenheim Bilbao, haute couture, high net worth, income inequality, invention of the steam engine, job automation, John Markoff, joint-stock company, Joseph Schumpeter, knowledge economy, knowledge worker, liberation theology, light touch regulation, linear programming, London Whale, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, Mikhail Gorbachev, Moneyball by Michael Lewis explains big data, NetJets, new economy, Occupy movement, open economy, Peter Thiel, place-making, Plutocrats, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, postindustrial economy, Potemkin village, profit motive, purchasing power parity, race to the bottom, rent-seeking, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, self-driving car, short selling, Silicon Valley, Silicon Valley startup, Simon Kuznets, Solar eclipse in 1919, sovereign wealth fund, stem cell, Steve Jobs, the new new thing, The Spirit Level, The Wealth of Nations by Adam Smith, Tony Hsieh, too big to fail, trade route, trickle-down economics, Tyler Cowen: Great Stagnation, wage slave, Washington Consensus, winner-take-all economy, zero-sum game

Many of today’s plutocrats stumbled a decade or two into their careers, but by then they had already accomplished so much that they were poised to seize even larger opportunities. The premium on early success means that the alpha geeks of the super-elite have been driven from a young age. The dorm room incubation of our most important technology companies is common knowledge. That’s where hedge funds are starting, too. Bill Ackman, the most influential activist investor in America today, whose targets have included J.C. Penney and Target, founded his first hedge fund with a classmate right after graduating with an MBA from Harvard. Ken Griffin, the billionaire founder of Citadel, the Chicago-based hedge fund, started trading bonds out of his college dorm room. The pattern holds for many of the emerging markets plutocrats, too. Carlos Slim, who bought his first share when he was twelve, started to make serious money straight out of college, when he was one of Los Casabolseros, or Stock Market Boys, a group of aggressive young men who traded shares on the Mexican stock market and played dominoes together after the market closed.


pages: 561 words: 114,843

Startup CEO: A Field Guide to Scaling Up Your Business, + Website by Matt Blumberg

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activist fund / activist shareholder / activist investor, airport security, Albert Einstein, bank run, Broken windows theory, crowdsourcing, deskilling, fear of failure, high batting average, high net worth, hiring and firing, Inbox Zero, James Hargreaves, Jeff Bezos, job satisfaction, Kickstarter, knowledge economy, knowledge worker, Lean Startup, Mark Zuckerberg, minimum viable product, pattern recognition, performance metric, pets.com, rolodex, Rubik’s Cube, shareholder value, Silicon Valley, Skype

Three-year and four-year terms are most common. It is possible for the shareholders to put up an alternative slate. In theory, this approach could be used in both private and public companies but in reality it is almost entirely limited to public companies. This will be perceived as a hostile move by most companies and they will fight the alternative slate of directors. This “alternative slate” approach is most commonly taken by “activist investors” who take a meaningful minority stake in a public company and agitate for changes in the board, management and strategic direction of the company. It can also be used in a hostile takeover effort. It is rare for an alternative slate to take control of a company but it is fairly common for a new director or two to get elected in this way. Boards should evolve. Boards should recruit new members on a regular basis.


pages: 421 words: 128,094

King of Capital: The Remarkable Rise, Fall, and Rise Again of Steve Schwarzman and Blackstone by David Carey; John E. Morris; John Morris

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activist fund / activist shareholder / activist investor, asset allocation, banking crisis, Bonfire of the Vanities, carried interest, collateralized debt obligation, corporate governance, corporate raider, credit crunch, diversification, diversified portfolio, fixed income, Gordon Gekko, margin call, Menlo Park, mortgage debt, new economy, Northern Rock, risk tolerance, Rod Stewart played at Stephen Schwarzman birthday party, Sand Hill Road, sealed-bid auction, Silicon Valley, sovereign wealth fund, The Predators' Ball, éminence grise

The mere prospect of becoming a buyout target could lift the price of a stock that was otherwise languishing, and corporations began to rethink their own capital structures. If a buyout firm could put more debt on the company so that any gain in the company’s value was magnified in the value of its stock, companies began to ask themselves, why couldn’t we do the same to give our public shareholders a higher return on their shares? In some cases, hedge funds and other activist investors urged companies to perform their own dividend recaps, borrowing more money to pay a dividend or to buy in some of their shares. The sheer magnitude of the funds and the deals had another side effect on the business, one that troubled some investors. The fixed 1.5 percent to 2 percent management fees the firms charged their investors, and the transaction fees they tacked on when they bought or sold a company, had grown so large in absolute dollar terms that they had become a wellhead of income at large private equity houses, rather than just a way of ensuring that some money was coming in the door in tough times.


pages: 413 words: 117,782

What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences by Steven G. Mandis

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activist fund / activist shareholder / activist investor, algorithmic trading, Berlin Wall, bonus culture, BRICs, business process, collapse of Lehman Brothers, collateralized debt obligation, commoditize, complexity theory, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, disintermediation, diversification, Emanuel Derman, financial innovation, fixed income, friendly fire, Goldman Sachs: Vampire Squid, high net worth, housing crisis, London Whale, Long Term Capital Management, merger arbitrage, Myron Scholes, new economy, passive investing, performance metric, risk tolerance, Ronald Reagan, Saturday Night Live, Satyajit Das, shareholder value, short selling, sovereign wealth fund, The Nature of the Firm, too big to fail, value at risk

As a member of the M&A department, I worked on a team to advise board members and CEOs of leading multinational companies on large, technically complex transactions. For example, I worked on a team that advised AT&T on combining its broadband business with Comcast in a transaction that valued AT&T broadband at $72 billion. I also helped sell a private company to Warren Buffett’s Berkshire Hathaway. As the head of Goldman’s unsolicited take-over and hostile raid defense practice, I worked on a team advising a client involved in a proxy fight with activist investor Carl Icahn. When I joined Goldman, partnership election at the firm was considered one of the most prestigious achievements on Wall Street, in part because the process was highly selective and a Goldman partnership was among the most lucrative. The M&A department had a remarkably good track record of its bankers being elected—probably one of the highest percentages of success in the firm at the time.


pages: 464 words: 121,983

Disaster Capitalism: Making a Killing Out of Catastrophe by Antony Loewenstein

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activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, American Legislative Exchange Council, anti-communist, Asian financial crisis, British Empire, Capital in the Twenty-First Century by Thomas Piketty, Chelsea Manning, clean water, collective bargaining, colonial rule, corporate social responsibility, Corrections Corporation of America, Edward Snowden, facts on the ground, failed state, falling living standards, Ferguson, Missouri, financial independence, full employment, G4S, Goldman Sachs: Vampire Squid, housing crisis, illegal immigration, immigration reform, income inequality, Julian Assange, mandatory minimum, market fundamentalism, mass incarceration, Naomi Klein, neoliberal agenda, obamacare, Occupy movement, offshore financial centre, open borders, private military company, profit motive, Ralph Nader, Ronald Reagan, Satyajit Das, Scramble for Africa, Slavoj Žižek, stem cell, the medium is the message, trade liberalization, WikiLeaks

But the management contract for Dilley was problematic, with Obama officials rushing to seal the deal and establishing the facility under conditions set for a CCA prison in Eloy, one thousand miles from Dilley. Eloy officials stated that they had no intention of visiting or monitoring Dilley.46 During Obama’s two terms in office, his administration continued to outsource more facilities to CCA and other corporations that ignored federal laws and abused human rights. Alex Friedmann, an activist investor and former prisoner who held CCA shares, told CNN: “Investors see this as an opportunity [the government imprisoning migrants]. This is a potentially untapped market that will have strong demand.”47 Disaster capitalism was the winner. Silky Shah, co-director of the Detention Watch Network, slammed the Obama administration’s decision to expand privatized facilities, arguing that “family detention is an abusive and inhumane practice that erodes family bonds and undermines children’s wellbeing.”48 Out in Lumpkin, the roads were empty.


pages: 483 words: 143,123

The Frackers: The Outrageous Inside Story of the New Billionaire Wildcatters by Gregory Zuckerman

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activist fund / activist shareholder / activist investor, American energy revolution, Asian financial crisis, Bakken shale, Bernie Sanders, Buckminster Fuller, corporate governance, corporate raider, credit crunch, energy security, Exxon Valdez, housing crisis, hydraulic fracturing, LNG terminal, margin call, Maui Hawaii, North Sea oil, oil rush, oil shale / tar sands, oil shock, peak oil, Peter Thiel, reshoring, self-driving car, Silicon Valley, sovereign wealth fund, Steve Jobs, urban decay

“Mark Ruffalo got an Academy Award nomination and was in the Avengers movie after” becoming involved in the antifracking movement. Either way, the publicity helped pressure New York State officials to maintain the moratorium on fracking in the state and it helped focus national attention on the drilling, dealing a public relations blow to those in the business. • • • In late 2010, billionaire investor Carl Icahn disclosed that he had purchased nearly 6 percent of Chesapeake’s shares. Icahn is a so-called activist investor, or someone who buys big chunks of a company and then levies pressure on its management to enact changes aimed at getting shares higher. Weeks later, Icahn reached out to McClendon to let him know the company had piled on too much debt. McClendon got the message. Chesapeake quickly announced plans to sell $5 billion in assets, including a deal to sell a one-third interest in its acreage in Wyoming to China National Offshore Oil Corporation, China’s largest offshore oil producer, helping Chesapeake reduce its debt.

Investment: A History by Norton Reamer, Jesse Downing

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activist fund / activist shareholder / activist investor, Albert Einstein, algorithmic trading, asset allocation, backtesting, banking crisis, Berlin Wall, Bernie Madoff, break the buck, Brownian motion, buttonwood tree, California gold rush, capital asset pricing model, Carmen Reinhart, carried interest, colonial rule, credit crunch, Credit Default Swap, Daniel Kahneman / Amos Tversky, debt deflation, discounted cash flows, diversified portfolio, equity premium, estate planning, Eugene Fama: efficient market hypothesis, Fall of the Berlin Wall, family office, Fellow of the Royal Society, financial innovation, fixed income, Gordon Gekko, Henri Poincaré, high net worth, index fund, information asymmetry, interest rate swap, invention of the telegraph, James Hargreaves, James Watt: steam engine, joint-stock company, Kenneth Rogoff, labor-force participation, land tenure, London Interbank Offered Rate, Long Term Capital Management, loss aversion, Louis Bachelier, margin call, means of production, Menlo Park, merger arbitrage, money market fund, moral hazard, mortgage debt, Myron Scholes, negative equity, Network effects, new economy, Nick Leeson, Own Your Own Home, Paul Samuelson, pension reform, Ponzi scheme, price mechanism, principal–agent problem, profit maximization, quantitative easing, RAND corporation, random walk, Renaissance Technologies, Richard Thaler, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Robert Shiller, Sand Hill Road, Sharpe ratio, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, spinning jenny, statistical arbitrage, survivorship bias, technology bubble, The Wealth of Nations by Adam Smith, time value of money, too big to fail, transaction costs, underbanked, Vanguard fund, working poor, yield curve

However, the future of investment must contemplate how some of these arrangements can distort behavior. Might the carried-interest feature cause certain stewards to treat it like a call option and invest in circumstances that are “heads I win, tails you lose”? Might there be opportunities for making corporate boards more shareholder friendly and reducing some cases of corporate abuses? Certainly, activist investors to some degree are pursuing such enhanced governance structures, but there is work that remains to be done. Small investors, too, must increasingly have access to mechanisms that ensure that their interests are aligned with either the managers they hire or the corporate heads who oversee the operations of the companies they purchase. Liquidity A second area needing greater focus is understanding liquidity.


pages: 829 words: 229,566

This Changes Everything: Capitalism vs. The Climate by Naomi Klein

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1960s counterculture, activist fund / activist shareholder / activist investor, battle of ideas, Berlin Wall, big-box store, bilateral investment treaty, British Empire, business climate, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, clean water, Climategate, cognitive dissonance, colonial rule, Community Supported Agriculture, complexity theory, crony capitalism, decarbonisation, deindustrialization, dematerialisation, Donald Trump, Downton Abbey, energy security, energy transition, equal pay for equal work, Exxon Valdez, failed state, Fall of the Berlin Wall, feminist movement, financial deregulation, food miles, Food sovereignty, global supply chain, hydraulic fracturing, ice-free Arctic, immigration reform, income per capita, Intergovernmental Panel on Climate Change (IPCC), Internet Archive, invention of the steam engine, invisible hand, Isaac Newton, James Watt: steam engine, light touch regulation, market fundamentalism, moral hazard, Naomi Klein, new economy, Nixon shock, Occupy movement, offshore financial centre, oil shale / tar sands, open borders, patent troll, Pearl River Delta, planetary scale, post-oil, profit motive, quantitative easing, race to the bottom, Ralph Waldo Emerson, Rana Plaza, Ronald Reagan, smart grid, special economic zone, Stephen Hawking, Stewart Brand, structural adjustment programs, Ted Kaczynski, the scientific method, The Wealth of Nations by Adam Smith, trade route, transatlantic slave trade, transatlantic slave trade, trickle-down economics, Upton Sinclair, uranium enrichment, urban planning, urban sprawl, wages for housework, walkable city, Washington Consensus, Whole Earth Catalog, WikiLeaks

Indeed the day the Copenhagen summit concluded—when the target was made official—the share prices of some of the largest fossil fuel companies hardly reacted at all.61 Clearly, intelligent investors had determined that the promises governments made in that forum were nothing to worry about—that they were not nearly as important as the actions of their powerful energy departments back home that grant mining and drilling permits. Indeed in March 2014, ExxonMobil confirmed as much when the company came under pressure from activist shareholders to respond to reports that much of its reserves would become stranded assets if governments kept promises to keep warming below 2 degrees by passing aggressive climate legislation. The company explained that it had determined that restrictive climate policies were “highly unlikely” and, “based on this analysis, we are confident that none of our hydrocarbon reserves are now or will become ‘stranded.’ ”62 Those working inside government understand these dynamics all too well.


pages: 692 words: 167,950

The Ripple Effect: The Fate of Fresh Water in the Twenty-First Century by Alex Prud'Homme

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2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, activist fund / activist shareholder / activist investor, American Society of Civil Engineers: Report Card, big-box store, bilateral investment treaty, carbon footprint, Chance favours the prepared mind, clean water, commoditize, corporate raider, Deep Water Horizon, en.wikipedia.org, Exxon Valdez, hydraulic fracturing, Intergovernmental Panel on Climate Change (IPCC), invisible hand, John Snow's cholera map, Louis Pasteur, mass immigration, megacity, oil shale / tar sands, peak oil, renewable energy credits, Report Card for America’s Infrastructure, Ronald Reagan, Silicon Valley, The Wealth of Nations by Adam Smith, urban sprawl, William Langewiesche

In 2002, the EPA issued a Record of Decision, which defined 197 miles of the Hudson a Superfund site (the largest in the nation), and required GE to undertake a massive restoration effort. Although the Superfund law holds polluters retroactively responsible for any cleanup, GE maintained that the PCBs in the Hudson were better left undisturbed, and delayed the case for years. Between 1990 and 2005, activist shareholders discovered that GE had spent $122 million on political donations, lobbyists, scientific experts, and lawyers—such as Harvard Law School’s constitutional expert Laurence Tribe—to avoid dredging the Hudson. In 2001 Jack Welch retired and was replaced as GE chairman by Jeffrey Immelt, who agreed to work with the EPA to dredge the Hudson clear of PCBs. In May 2009, a dredge lowered a blue clamshell bucket into the river near the town of Moreau, New York, and brought up the first scoop of toxic mud, which it deposited in a hopper barge.


pages: 355 words: 92,571

Capitalism: Money, Morals and Markets by John Plender

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activist fund / activist shareholder / activist investor, Andrei Shleifer, asset-backed security, bank run, Berlin Wall, Big bang: deregulation of the City of London, Black Swan, bonus culture, Bretton Woods, business climate, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, collapse of Lehman Brothers, collective bargaining, computer age, Corn Laws, corporate governance, creative destruction, credit crunch, Credit Default Swap, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, discovery of the americas, diversification, Eugene Fama: efficient market hypothesis, eurozone crisis, failed state, Fall of the Berlin Wall, fiat currency, financial innovation, financial intermediation, Fractional reserve banking, full employment, God and Mammon, Gordon Gekko, greed is good, Hyman Minsky, income inequality, inflation targeting, information asymmetry, invention of the wheel, invisible hand, Isaac Newton, James Watt: steam engine, Johann Wolfgang von Goethe, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, joint-stock company, Joseph Schumpeter, labour market flexibility, liberal capitalism, light touch regulation, London Interbank Offered Rate, London Whale, Long Term Capital Management, manufacturing employment, Mark Zuckerberg, market bubble, market fundamentalism, mass immigration, means of production, Menlo Park, money market fund, moral hazard, moveable type in China, Myron Scholes, Nick Leeson, Northern Rock, Occupy movement, offshore financial centre, paradox of thrift, Paul Samuelson, Plutocrats, plutocrats, price stability, principal–agent problem, profit motive, quantitative easing, railway mania, regulatory arbitrage, Richard Thaler, rising living standards, risk-adjusted returns, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, shareholder value, short selling, Silicon Valley, South Sea Bubble, spice trade, Steve Jobs, technology bubble, The Chicago School, The Great Moderation, the map is not the territory, The Wealth of Nations by Adam Smith, Thorstein Veblen, time value of money, too big to fail, tulip mania, Upton Sinclair, Veblen good, We are the 99%, Wolfgang Streeck, zero-sum game

Haldane, while executive director, financial stability, and member of the Financial Policy Committee of the Bank of England, at Queen’s University, Belfast, 2012. 40 Figures from ‘Small lessons from a big crisis’, a speech by Andrew G. Haldane at the 45th annual conference of the Federal Reserve Bank of Chicago. 41 Figures from ‘A Leaf Being Turned’, a speech by Andrew G. Haldane given to Occupy Economics at Friends House, Euston, London, 2012. 42 Address at Trinity Church in Lower Manhattan on the first anniversary of the 2001 attacks on the Twin Towers. 43 A notable exception was Eric Knight of the activist fund management group Knight Vinke. He pointed out, in his campaign to improve performance at HSBC, that the underlying return on HSBC’s assets was stagnant and that return on equity was a misleading indicator of performance. With hindsight, it has to be said that his choice of target was less than inspired, given that HSBC survived the financial crisis better than most. But his analysis was acute. 44 Jean-Claude Trichet, president of the European Central Bank during the credit bubble, was an honourable exception.


pages: 318 words: 93,502

The Two-Income Trap: Why Middle-Class Parents Are Going Broke by Elizabeth Warren, Amelia Warren Tyagi

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activist fund / activist shareholder / activist investor, business climate, Columbine, declining real wages, equal pay for equal work, feminist movement, financial independence, labor-force participation, late fees, McMansion, mortgage debt, new economy, New Journalism, payday loans, school choice, school vouchers, telemarketer, urban sprawl, women in the workforce

New York Times, November 2, 1997; Tim Whitmire, “Tapes Don’t Stick in Court: Ex-Texaco Executives Walk,” Chicago Sun-Times, May 13, 1998. 108 See chapter 1, note 10, and chapter 5, notes 17 and 21, for more information on these calculations. 109 Letter from American Association of University Women, Children NOW, Children’s Defense Fund, Center for Law and Social Policy (CLASP), Feminist Majority Foundation, National Association of Commissions for Women (NACW), National Center for Youth Law, National Organization for Women, National Partnership for Women and Families, National Women’s Conference, National Women’s Law Center, National Youth Law Center, NOW Legal Defense and Education Fund, OWL, The Women Activist Fund, Inc., Wider Opportunities for Women, Women Employed, Women Work!, Women’s Law Center of Maryland, Inc., YWCA of the USA, March 2, 2000 (on file with the authors). The leading organizations are the National Women’s Law Center, the NOW Legal Defense and Education Fund, and the National Partnership for Women and Families. 110 There was a glossy photograph of Senator Biden in the NOW Legal Defense annual report, which is sent to thousands of politically active women.


pages: 341 words: 104,493

City of Exiles by Alec Nevala-Lee

activist fund / activist shareholder / activist investor, glass ceiling, side project, Transnistria

It was clearly just a silk-screened photograph, daubed with bloody reds and oranges, and she recognized it at once as the work of a celebrated artist of the sixties who had cheerfully embraced Thatcherite materialism. At the far end of the room sat James Morley, the man in the portrait, stationed before an array of trading terminals. Rising from his desk, he approached Renata. “Pleased you could make it,” Morley said, extending a hand. “I’ve been looking forward to seeing you again.” “Glad to be here,” Renata said, setting down her bag for the handshake. The manager of the Cheshire Group’s activist fund was trim and tan, wearing a wool suit and worsted tie, and would have been quite handsome were it not for his eyes, which were startlingly like those of a vulture. Renata wondered how much he knew about her situation. She was convinced that her creditors had sources everywhere, and although she had recently taken precautions to ensure that her staff remained loyal, it was impossible to silence the rumors entirely.


pages: 772 words: 203,182

What Went Wrong: How the 1% Hijacked the American Middle Class . . . And What Other Countries Got Right by George R. Tyler

8-hour work day, active measures, activist fund / activist shareholder / activist investor, affirmative action, Affordable Care Act / Obamacare, bank run, banking crisis, Basel III, Black Swan, blood diamonds, blue-collar work, Bolshevik threat, bonus culture, British Empire, business process, capital controls, Carmen Reinhart, carried interest, cognitive dissonance, collateralized debt obligation, collective bargaining, commoditize, corporate governance, corporate personhood, corporate raider, corporate social responsibility, creative destruction, credit crunch, crony capitalism, crowdsourcing, currency manipulation / currency intervention, David Brooks, David Graeber, David Ricardo: comparative advantage, declining real wages, deindustrialization, Diane Coyle, Double Irish / Dutch Sandwich, eurozone crisis, financial deregulation, financial innovation, fixed income, Francis Fukuyama: the end of history, full employment, George Akerlof, George Gilder, Gini coefficient, Gordon Gekko, hiring and firing, income inequality, invisible hand, job satisfaction, John Markoff, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, labor-force participation, labour market flexibility, laissez-faire capitalism, lake wobegon effect, light touch regulation, Long Term Capital Management, manufacturing employment, market clearing, market fundamentalism, Martin Wolf, minimum wage unemployment, mittelstand, moral hazard, Myron Scholes, Naomi Klein, Northern Rock, obamacare, offshore financial centre, Paul Samuelson, pension reform, performance metric, pirate software, Plutocrats, plutocrats, Ponzi scheme, precariat, price stability, profit maximization, profit motive, purchasing power parity, race to the bottom, Ralph Nader, rent-seeking, reshoring, Richard Thaler, rising living standards, road to serfdom, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, Sand Hill Road, shareholder value, Silicon Valley, South Sea Bubble, sovereign wealth fund, Steve Ballmer, Steve Jobs, The Chicago School, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transcontinental railway, transfer pricing, trickle-down economics, tulip mania, Tyler Cowen: Great Stagnation, union organizing, Upton Sinclair, upwardly mobile, women in the workforce, working poor, zero-sum game

Stancata, Stephane Cote, Rodolfo Mendoza-Denton, and Dacher Keltner, “Higher Social Class Predicts Increased Unethical Behavior,” Proceeds of the National Academy of Sciences, February 27, 2012. 15 For example, see: Randall Morck, Andrie Shleifer, and Robert Vishny, “Alternative Mechanisms for Corporate Control,” American Economic Review, 1989, 79:842–852. 16 Ian Austen, “Shake-Up at Canadian Pacific Railway As Activist Investor Takes Control,” New York Times, May 18, 2012. 17 Peter Whoriskey, “The Lake Wobegon Effect Lifts CEO’s Pay,” Washington Post, Oct. 4, 2011, and Ryan Chittum, “Cronyism and Executive Compensation,” The Audit, Columbia Journalism Review, Oct. 4, 2011. 18 Whoriskey, Ibid. 19 Heather Landy, “Executives Took, But the Directors Gave,” New York Times, April 5, 2009. 20 David Cay Johnston, Perfectly Legal, 2003, 250. 21 David Carr, “Why Not Occupy Newsrooms?


pages: 827 words: 239,762

The Golden Passport: Harvard Business School, the Limits of Capitalism, and the Moral Failure of the MBA Elite by Duff McDonald

activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, Albert Einstein, barriers to entry, Bayesian statistics, Bernie Madoff, Bob Noyce, Bonfire of the Vanities, business process, butterfly effect, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, Clayton Christensen, cloud computing, collateralized debt obligation, collective bargaining, commoditize, corporate governance, corporate raider, corporate social responsibility, creative destruction, deskilling, discounted cash flows, disintermediation, Donald Trump, family office, financial innovation, Frederick Winslow Taylor, full employment, George Gilder, glass ceiling, Gordon Gekko, hiring and firing, income inequality, invisible hand, Jeff Bezos, job-hopping, John von Neumann, Joseph Schumpeter, Kenneth Arrow, London Whale, Long Term Capital Management, market fundamentalism, Menlo Park, new economy, obamacare, oil shock, pattern recognition, performance metric, Peter Thiel, Plutocrats, plutocrats, profit maximization, profit motive, pushing on a string, Ralph Nader, Ralph Waldo Emerson, RAND corporation, random walk, rent-seeking, Ronald Coase, Ronald Reagan, Sand Hill Road, Saturday Night Live, shareholder value, Silicon Valley, Skype, Steve Jobs, survivorship bias, The Nature of the Firm, the scientific method, Thorstein Veblen, union organizing, urban renewal, Vilfredo Pareto, War on Poverty, William Shockley: the traitorous eight, women in the workforce, Y Combinator

The two had some wins, including a $1 billion return from a bet against bond insurer MBIA, but a number of bad calls led to the winding down of the fund in 2002. The “risks” one takes in hedge fund land only extend so far. When too many bets go against you, you move on—an experience not too distant from pretending one is a CEO in a case study. Not long after that, Ackman founded Pershing Square with a $50 million investment from Leucadia National Corporation. He also refashioned himself into an activist investor. Fights against the managements of Target and JCPenney followed. When betting against the nutritional supplement maker Herbalife, Ackman referred to it as a “moral obligation” and has otherwise insisted that his investments are guided by a strict moral code.29 And, incidentally, defended through schoolyard taunts. When Berkshire Hathaway vice chairman Charlie Munger questioned the morality of one of Ackman’s holdings, Valeant Pharmaceuticals, in late 2015 after it had been accused of jacking up the prices of drugs to unaffordable levels, Ackman fired back that the soda made by Coca-Cola, a longtime Berkshire holding, was bad for children.


pages: 461 words: 128,421

The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street by Justin Fox

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activist fund / activist shareholder / activist investor, Albert Einstein, Andrei Shleifer, asset allocation, asset-backed security, bank run, beat the dealer, Benoit Mandelbrot, Black-Scholes formula, Bretton Woods, Brownian motion, capital asset pricing model, card file, Cass Sunstein, collateralized debt obligation, complexity theory, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, discovery of the americas, diversification, diversified portfolio, Edward Glaeser, Edward Thorp, endowment effect, Eugene Fama: efficient market hypothesis, experimental economics, financial innovation, Financial Instability Hypothesis, fixed income, floating exchange rates, George Akerlof, Henri Poincaré, Hyman Minsky, implied volatility, impulse control, index arbitrage, index card, index fund, information asymmetry, invisible hand, Isaac Newton, John Meriwether, John Nash: game theory, John von Neumann, joint-stock company, Joseph Schumpeter, Kenneth Arrow, libertarian paternalism, linear programming, Long Term Capital Management, Louis Bachelier, mandelbrot fractal, market bubble, market design, Myron Scholes, New Journalism, Nikolai Kondratiev, Paul Lévy, Paul Samuelson, pension reform, performance metric, Ponzi scheme, prediction markets, pushing on a string, quantitative trading / quantitative finance, Ralph Nader, RAND corporation, random walk, Richard Thaler, risk/return, road to serfdom, Robert Bork, Robert Shiller, Robert Shiller, rolodex, Ronald Reagan, shareholder value, Sharpe ratio, short selling, side project, Silicon Valley, South Sea Bubble, statistical model, The Chicago School, The Myth of the Rational Market, The Predators' Ball, the scientific method, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, Thorstein Veblen, Tobin tax, transaction costs, tulip mania, value at risk, Vanguard fund, Vilfredo Pareto, volatility smile, Yogi Berra

If Hanson wanted to raise a little hell, they weren’t averse to quietly supporting him. It all came to a head during the economic downturn of the early 1990s. Many big American corporations struggled, as they had during previous recessions in the 1970s and early 1980s. This time around, institutional shareholders showed little patience with CEOs who couldn’t deliver a quick turnaround. Monks, who had sold ISS and started an activist fund called Lens, tried to get himself elected to the board of Sears to express his frustration with the retailer’s direction. He failed, but Sears soon made many of the changes he had recommended. At Calpers, Hanson began pressuring boards to remove underperforming CEOs. In 1991 and 1992, CEOs targeted by Calpers and other institutions were thrown out at Westinghouse, American Express, and General Motors.


pages: 710 words: 164,527

The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order by Benn Steil

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activist fund / activist shareholder / activist investor, Albert Einstein, Asian financial crisis, banks create money, Bretton Woods, British Empire, capital controls, currency manipulation / currency intervention, currency peg, deindustrialization, European colonialism, facts on the ground, fiat currency, financial independence, floating exchange rates, full employment, global reserve currency, imperial preference, invisible hand, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Rogoff, margin call, means of production, money: store of value / unit of account / medium of exchange, Monroe Doctrine, New Journalism, open economy, Paul Samuelson, Potemkin village, price mechanism, price stability, psychological pricing, reserve currency, road to serfdom, seigniorage, South China Sea, special drawing rights, The Great Moderation, the market place, trade liberalization, Works Progress Administration

Vinson, Keynes wrote to Dalton, “rail-road[ed] this decision through the Conference, vocally supported (as became usual) by a pathetic procession of stooges, of which Ethiopia (represented by an American banker), Salvador, Guatemala, Mexico and China were prominent, with most of the rest discreetly silent.”20 As important as the symbolism of location was, the more substantive issue to be resolved was the role of the directors, particularly those of the fund. Given their vision of an activist fund, working to correct national policies that were creating dangerous international financial imbalances, the Americans insisted that the directors be full-time and well remunerated, with a large battalion of specialist technical staff behind them. The British, who wanted a fund that was more like an automatic credit mechanism than a nosy new American-dominated bureaucracy with a mind of its own, countered that its directors should already have important day jobs in their own governments or central banks; their role in the fund should be only part-time, mainly ensuring that their respective countries’ national interests were protected.