New York (HedgeCo.net) – Activist investing has become the latest investment style to come under fire, but one of the leading activist investors is not going to stand idly by and let politicians, union bosses or other asset management executives criticize activist investing.
Daniel Loeb, founder of Third Point LLC, fired back at the critics in his second-quarter letter to investors.
Here is Loeb’s letter:
Lately, a varied chorus of powerful union bosses, politicians and candidates, an asset management company executive, and a few ivory tower types have asserted that activism is short term in nature, engaged in by “hit and run” investors who care only about making a quick buck while leaving a company and its employees in ruins. They assert that activists blackmail their targets to choke off long-term growth initiatives like research and development in favor of financial gimmicks that artificially and temporarily inflate share prices.
It might surprise people to hear that we agree completely that the sort of activism they describe is abominable. Luckily, it does not really exist, and certainly not at Third Point. Activists today are very different from corporate raiders of the ’80s (about whom these criticisms might have been leveled fairly). Our activist investments, which we consider to be those in which we seek to use our minority shareholding to obtain board seats, have been some of our most complex and have been held for well over the one year threshold identified as offensive by the critics. In almost every example — from Ligand to Yahoo to Sotheby’s — our influence has contributed meaningfully to the sustainability and growth of the companies in question. In each of the three investments above, for example, we brought in all-star CEOs and gave them extensive runway to implement ambitious turnaround plans that would take years to come to fruition. A strong CEO with a coherent operating plan can create value for shareholders along the way as their plans are implemented. Our investors have benefited from our ability to install visionary leaders like John Higgins, Marissa Mayer, and Tad Smith.
Loeb certainly has the right to defend the strategy as he has been one of the most successful activist investors. Since launching Third Point in 1995, he has averaged 20.5% annualized returns.