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UPDATE 2-Relational Investors to relaunch fund under new management in 2015
October 1, 2014 / 8:09 PM / 3 years ago

UPDATE 2-Relational Investors to relaunch fund under new management in 2015

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By Svea Herbst-Bayliss

BOSTON, Oct 1 (Reuters) - Activist investment firm Relational Investors plans to relaunch its main fund next year under new portfolio management, as co-founder Ralph Whitworth battles health issues, a source familiar with the fund said on Wednesday.

The $6 billion firm plans to liquidate the current portfolio by the end of 2015 before relaunching it with many of the same holdings, according to the source, who suggested the move may be a way to get around a so-called “key man” provision that governs how a fund is managed.

A Relational official declined to comment.

Relational stopped making new investments in July after Whitworth stepped down to deal with a recurrence of throat cancer. Relational co-founder David Batchelder has been running the existing fund since Whitworth stepped aside.

No further details were available about who will manage the new fund once it is launched, but the source said that Whitworth, 58, and Batchelder, 65, would be its co-chairmen.

The story was first reported by the Wall Street Journal.

Whitworth is well respected in the close-knit activist investment community for his ability to push for change at companies where he has taken a big position such as getting rid of underperforming chief executives or engineering sales.

Over the years he has sat on many corporate boards including Home Depot, where he paved the way for former CEO Robert Nardelli’s departure, and Genzyme, where he pushed for the company to sell itself to Sanofi.

Most recently he was the interim chair at Hewlett-Packard but stepped aside in July when he also took the leave of absence from his own firm.

There is no estimated date when Whitworth may return, something which has sparked worries among investors, some of whom had taken to referring to the firm as “Ralph’s show.”

Several other activist investors said that Relational clients would likely give the firm six months before making decisions on whether to stay invested in the fund.

For institutional investors like pension funds the person at the top is often critical and if fund documents include a key man provision as they do at Relational, these investors are often released from their obligations to stay invested for a certain length of time.

“If investors believe Whitworth was responsible for all the decisions then it will be difficult to retain a large percent of the assets. However if they view it as a team approach it is much more likely that investors will stay,” said Don Steinbrugge, managing partner at investment consulting firm Agecroft Partners.

Relational counts big pension funds among its investors, including California Public Employees’ Retirement System, for which it manages more than $1 billion, and California State Teachers’ Retirement System.

At the end of June, San Diego-based Relational’s biggest investments included Hewlett Packard, SPX Corp and Mondelez. (Reporting by Svea Herbst-Bayliss, editing by Richard Valdmanis and Cynthia Osterman)

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