{"id":8495,"date":"2022-10-06T20:04:54","date_gmt":"2022-10-06T19:04:54","guid":{"rendered":"https:\/\/www.simtrade.fr\/blog_simtrade\/?p=8495"},"modified":"2022-10-06T20:04:54","modified_gmt":"2022-10-06T19:04:54","slug":"activist-funds","status":"publish","type":"post","link":"https:\/\/www.simtrade.fr\/blog_simtrade\/activist-funds\/","title":{"rendered":"Activist Funds"},"content":{"rendered":"

Activist Funds<\/h1>\n

\"Akshit<\/a><\/p>\n

This article written by Akshit GUPTA<\/a> (ESSEC Business School, Grande Ecole<\/i> Program – Master in Management, 2019-2022) introduces activist funds<\/em> which is a type of fund based on shareholder activism to influence a company\u2019s board and top management decisions.<\/p>\n

Introduction<\/h2>\n

Activist funds use an investment strategy where they buy shares in a publicly listed company with the aim to influence a company\u2019s board and top management decisions. A large shareholding provides the activist fund with high power to influence the decision making of these firms at the management level. The aim of an active fund is to push for decisions or changes that would increase the share price and thus, the value of its portfolio.<\/p>\n

Activist funds target companies which are poorly managed or have untapped value which if explored, can lead to significant increase in the stock price. They typically buy the equity shares of these companies which provides them with ownership and the rights to vote during the shareholders\u2019 General Meetings to influence the board and top management decisions. Activist funds propose and help implement changes that favourably impact the stock prices and helps them to generate absolute market returns that are generally higher than the market benchmarks. These changes include changes in business strategy, operational decisions, capital structure, corporate governance and the day-to-day practices of the management.<\/p>\n

Activist investors are normally seen operating either a private equity firm or a hedge fund and specialising in specific industries or businesses. High-net worth individuals and family offices are majorly involved in activist investing as they have access to huge investments and expertise.<\/p>\n

Benefits of activist funds<\/h2>\n

Like other types of hedge funds and private equity firms, activist funds aim at providing their clients (investors) with investments managed in an efficient manner to optimize expected returns and risk. They try to generate alpha on the clients\u2019 investment by actively participating in company\u2019s board and top management decisions. So, activist funds are often acknowledged as the alternative funds<\/em> in the asset management industry.<\/p>\n

Concerns associated with activist funds<\/h2>\n

Although the investments in activist funds are handled by professionals and can generate absolute performance, they also come with some concerns for the investors. Some of the commonly associated concerns with activist fund investments are:<\/p>\n