Yvan Allaire and François Dauphin return to a topic on which they have been active and important commentators and analysts; namely, hedge fund activism. Specifically, they report on a new study they conducted:
We ... explored, among other things, the consequences of activism over time when compared to a random sample of firms with similar characteristics at the time of intervention.
Focusing on activist events of the years 2010 and 2011, we obtained a sample of 290 campaigns initiated by 165 activist hedge funds which targeted 259 distinct firms. To map out the actions and performance of these 259 targeted companies, we have set up a random sample of 259 companies selected to match the targeted companies at the intervention year in terms of industry classification and market value.
This research does not provide any evidence of the superior strategic sagacity of hedge fund managers but does point to their keen understanding of what moves stock prices in the short term. Indeed, in none of the 259 cases studied here did hedge funds make proposals of a strategic nature to enhance the long-term performance of the firm.
That should concern society, governments, pension funds and other institutional investors with pretension of a long-term investment horizon.
indeed, it should.
