Activist Investors See Double-Digit Returns in 2023 After Year of Losses
After a year of losses in 2022, activist investors staged a strong comeback in 2023, achieving double-digit returns fueled by a stronger equity market and effective stock picking. According to data from Hedge Fund Research, activist investors boasted an average return of 20.2% last year, a significant improvement from the average loss of 16% in 2022. This rebound in returns is seen as a positive sign for the activist investing sector, as it indicates that investors were able to capitalize on the market conditions and make successful changes within targeted companies.
Fresh Capital Flowing Into Activist Investing Sets Stage for More Corporate Battles
With fresh capital ready to flow into the activist investing sector, more corporate battles are expected in the coming year. This influx of capital, coupled with the increasing use of tools made famous by veteran corporate agitators like Carl Icahn, is likely to fuel further activism activity. By pushing corporations to change leadership, streamline operations, or put themselves up for sale, activist investors are expected to continue making their mark on the corporate landscape. This increased activity is seen as a positive development for shareholders and investors who believe that companies can benefit from the oversight and pressure exerted by activists.
Mason Morfit’s ValueAct Capital and Bill Ackman’s Pershing Square Report Impressive Returns
Two prominent activist investors, Mason Morfit’s ValueAct Capital and Bill Ackman’s Pershing Square Holdings, reported impressive returns in 2023. ValueAct Capital achieved a 39% return while Pershing Square Holdings reported a 27% gain. These strong performance results highlight the effectiveness of their investment strategies and the ability of activist investors to generate significant returns for their clients. It also underscores the potential for success in activist investing when it is executed with skill and precision.
Rising Stock Market and Skillful Target Identification Boost Activist Investors in 2023
The rising stock market and the ability of activists to skillfully identify targets were contributing factors to the success of activist investors in 2023. A rising stock market provided a favorable climate for activists to achieve strong returns on their investments. Additionally, the ability to identify companies that would benefit from activism tactics, such as management changes or strategic alternatives, played a crucial role in generating positive outcomes. Activist investors showed their agility and acumen by selectively targeting companies that were ripe for change and successfully advocating for improvements within those organizations.
Investors Ready to Push Harder for Change as Activism Activity Hits New Record
Looking ahead to 2024, investors are prepared to push companies even harder for change as activism activity reaches new heights. Last year saw a record number of new activist campaigns, indicating a growing appetite for activism among investors. Activists are anticipated to accelerate changes that boards may already be contemplating and are expected to focus on smaller market cap companies that underperformed compared to the large-cap spectrum in 2023. The strong returns achieved by activists last year have encouraged investors to commit fresh capital to the sector, with many expecting returns to remain robust as deal-making picks up.
Analyst comment
Positive news: Activist investors experienced a strong comeback in 2023, achieving double-digit returns after a year of losses. This rebound in returns indicates that investors were successful in capitalizing on market conditions and making changes within targeted companies. With fresh capital flowing into the sector, more corporate battles are expected in the coming year, which is seen as a positive development for shareholders. Prominent activist investors, Mason Morfit’s ValueAct Capital and Bill Ackman’s Pershing Square Holdings, reported impressive returns, highlighting the effectiveness of their strategies. The rising stock market and skillful target identification also contributed to the success of activist investors. Looking ahead to 2024, investors are prepared to push companies even harder for change as activism activity reaches new heights, fueled by strong returns and a growing appetite for activism among investors.
