Extreme Value Hedging: How Activist Hedge Fund Managers Are Taking on the World

Conclusion: Saturation or No Saturation?

It would be easy to say that these activist investors are a flash in the pan, that they only have an insignificant amount of capital under management, and that serious long-term institutional investors are not really paying attention to them. That's the perception corporate America would like to have you believe. But most hedge fund managers think differently.

In fact, Hedge Fund Research in Chicago estimates that every year since 2004 more hedge funds state in marketing materials to their investors that activism is their core strategy. Other studies have shown that traditional hedge fund managers believe that there will continue to be more activists with more assets under management in 2008 and beyond.

There are several trends in play behind the perception by many that activist hedge funds are growing in size and numbers. For one thing, there are more new sources of funding for activists than ever before. Fund of hedge fund managers are fueling their investment vehicles with activist funds; they are even setting up devoted activist funds of hedge funds.

Also, institutional investors of all sorts are allocating capital more than ever to activists. Some institutions are becoming new non-traditional activist funds on their own. Previously passive pension funds, such as Toronto-based Ontario Teachers' Pension Plan (OTPP) and the California Public Employees' Retirement System (CalPERS), are getting more involved in activism themselves (in addition ...