| NEW YORK
NEW YORK Feb 14 Activist hedge funds recovered
from a slow start last year, ending 2016 with sharp gains across
the sector, spurred by a stock rally that followed the U.S.
Hedge fund managers that exclusively or partially manage an
activist portfolio of stocks cited the election of President
Donald Trump as a year-end boost and a likely tailwind for 2017,
though several expressed concern that the policy direction
coming from the White House remains uncertain.
"Like it or not, Donald Trump's presidency changes
everything," activist Raging Capital said in its fourth-quarter
letter. The fund, which manages around $900 million, was up 27
percent last year.
Unlike most of the hedge fund industry, activist managers
directly engage with chief executives and boards to push
changes, sometimes publicly calling out the companies and
pursuing proxy fights.
The HFRI Event-Driven activist index showed a 10.4 percent
gain for the year, compared with a 1.15 percent bump the year
before. In 2016, the S&P 500 index ended the year up 9.5
New activist targets in 2016 included restaurant chain
Buffalo Wild Wings, refiner Marathon Petroleum
and industrial retailer HD Supply.
J.P. Morgan director David Hunker, who advises companies on
shareholder activism, said activists showed more discipline
toward the end of the year in targeting companies where a
broader set of investors were unhappy.
"There's a lot more going on among activists to really
understand what shareholder frustrations are and where they can
drive a wedge between management teams, the board and their
investors," Hunker said.
Raging Capital Chief Investment Officer, William Martin,
said Trump's election, and the anticipation of low-tax,
pro-business policies, have handed the economic baton over to
Congress from the U.S. Federal Reserve, which had kept interest
rates at near-zero levels for nearly a decade.
"Many of the Republican proposals have potentially far-
reaching impacts on certain industries, though sufficient detail
does not exist to properly quantify these impacts or their
timing," according to hedge fund PSAM, which manages around $2
billion and was up 14 percent last year.
The hedge fund, which occasionally takes activist positions,
added that Trump's expected deregulation push could further
accelerate merger deals in 2017, with media companies expected
to lead the pack.
(Reporting by Michael Flaherty; Editing by Alan Crosby)