April 8, 2020 / 7:19 PM / 2 months ago

Activist Blackwells up 20% in first quarter, firm plans taking in client capital

BOSTON (Reuters) - For many hedge funds specializing in prodding management to perform better, the first three months of 2020 marked the worst start to the year they have experienced, ever.

For Jason Aintabi, who runs Blackwells Capital, early 2020 was his best start ever.

While the average activist hedge fund lost 33% in the first quarter, fueled by a 25% drop in March, according to data from Hedge Fund Research, Blackwells gained 20% in the quarter and returned 10% in March, according to data seen by Reuters.

Blackwells, which made headlines last month by reaching a settlement that handed the activist a fourth board seat at real estate investment firm Colony Capital (CLNY.N), has mounted five activist campaigns during its four-year lifetime.

This year’s returns put Aintabi, who founded Blackwells as part of his family office in 2016, far ahead of some older, bigger and better known activists. Daniel Loeb’s Third Point Offshore fund lost 11% in March and Nelson Peltz’ Trian Partners fell 16% last month, investors said.

To be sure, some prominent activists were winners in March, with William Ackman’s Pershing Square Capital Management up 11.1%.

Soon, Aintabi plans to convert Blackwells into a hedge fund and take in capital from outside investors for the first time, people familiar with his plans said.

Launching a hedge fund, never an easy proposition, may be all the more difficult now as investors compare this economic crisis - which has sent the S&P 500 index tumbling 20% in the first quarter - with the 2008 financial crisis when activist funds lost 40%.

But Blackwells’ early numbers will go a long way to establishing a track record that investors say will prompt a closer look, at least.

Early returns were boosted by bets consumer discretionary stocks, including travel, leisure, retail industries, would decline. Financial, consumer staples and communications services stocks helped and a big winner was internet service provider Cogent Communications (CCOI.O), which gained 24% in the first quarter as millions stayed home.

The fight at Colony, successful in board room, weighed on returns as the stock fell 61% in the quarter.

Blackwells previously pushed for changes at global trade management software provider Amber Road which sold itself to E2open in 2019, earning Blackwells a 50% gain.

In 2018, Blackwells battled with food distributor Supervalu and earned a 128% return. At Bed Bath & Beyond (BBBY.O), Blackwells was ready to try and unseat the entire board before others waged a fight last year, a source said.

Reporting by Svea Herbst-Bayliss; Editing by Nick Zieminski

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