May 15, 2017 / 9:45 PM / 5 months ago

UPDATE 2-ValueAct's Ubben taps Morfit for CIO post in succession plan

(Adds details on Morfit)

By Svea Herbst-Bayliss

BOSTON, May 15 (Reuters) - Activist hedge fund investor Jeffrey Ubben is handing over the reins of his $16 billion investment firm by promoting long-time business partner Mason Morfit to chief investment officer.

Morfit, 41, will take over the position in July, Ubben said in a letter sent to investors on Monday, giving him the last word on the kind of investments ValueAct Capital Management LP makes. Morfit has been a partner for more than a decade and is currently president of the San Francisco-based hedge fund.

Ubben, 55, will give up his role as chief investment officer but remain chief executive.

The letter was signed by Ubben, Morfit and Chief Operating Officer Bradley Singer.

“From the start, we believed that good succession planning is core to good governance,” the trio wrote, adding that the firm demands the same things from itself that it wants to see at its portfolio companies - solid plans for the future.

The group reached its decision to promote Morfit, who has served on boards at Microsoft and Valeant, roughly 10 years ago. Morfit was 25 when he joined the hedge fund and most recently led the firm’s investments in Morgan Stanley and KKR & Co. Having survived the financial crisis, Morfit is battle tested, the group assured its investors.

Succession planning has been a critical issue in the $3 trillion hedge fund industry, with many investors noting that it is often tough to keep a firm going after its founder leaves.

Activist investors like Carl Icahn and William Ackman have seen a string of former analysts leave their firms to start their own hedge funds. But ValueAct is different.

“There is a master plan for this place that dates to our founding. This transition is not abrupt. We worked closely from the beginning, have a talented team and believe we have an institution built to last,” Morfit told Reuters.

The firm also distinguishes itself by trying to avoid the limelight.

While Icahn and Ackman often court publicity to push their investments, ValueAct has carefully curated a reputation of keeping a lower profile and prefers to work behind the scenes with management to improve operations.

At Microsoft Corp, the firm stayed in the background as a change in leadership between Steve Ballmer and Satya Nadella was hammered out. ValueAct got a board seat that Morfit filled.

From the beginning Morfit was on a fast track. He was named partner at age 27, joined his first board at age 29 and served on six, including Microsoft, before the age of 40.

In its letter, the group said Ubben’s personality set the tone and that his “tendency not to take himself too seriously” was “foundational” to the firm, its culture and its success.

ValueAct has returned an average 15 percent a year since 2000, when it was founded, a person familiar with its performance said.

Now the name opens doors and Ubben rubbed shoulders with some of the world’s most powerful thinkers at the Milken Institute Global Conference earlier this month.

But at the start, the partners recalled sneaking into conferences together “because you have a no-name firm on your business card” and getting lost together in a rental car in the Florida Everglades.

Reporting by Svea Herbst-Bayliss; Editing by Andrew Hay and Dan Grebler

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