THE WALL STREET
Investors Build Up Their War Chests
Third Point Raises $2.5 Billion
That the Hedge Fund Could Deploy by Year-End; Others Add to Their
Juliet Chung and
Updated Sept. 11,
2014 11:01 p.m. ET
Daniel Loeb, center, and some other activists have described the
current environment as the best they have seen for raising cash.
CEOs, beware: Activist investors who target America's corporations are
gathering more ammunition.
A number of the largest activists are raising billions of dollars, in
an effort to take advantage of their increasing clout in boardrooms
and above-average hedge-fund returns.
Third Point LLC recently raised a $2.5 billion war chest that the
hedge fund could deploy by year-end, people familiar with the matter
said Thursday. Other activists, including Trian Fund Management LP,
Pershing Square Capital Management LP and Jana Partners LLC, are also
expanding the size of their coffers, people familiar with those firms
Funds under management by these activists and others grew by $9.4
billion in the first half of the year to $111 billion, gaining more in
that period than in the previous two years combined, according to
industry researcher HFR. Mr. Loeb and some other activists have
described the current environment as the best they have seen for
The gains come as activists, who
typically buy stakes in companies and agitate for strategic or
financial changes, are now a force to be reckoned with at U.S.
companies. The investors, once dismissed as corporate raiders, have
gained board seats or forced change at such blue-chip companies as
Microsoft Corp. and
Procter & Gamble.
The investors have also turned in returns that have outperformed their
hedge-fund peers of late. Through August, activist investors returned
an average 5.9% for the year, according to HFR, compared with a 3.9%
gain for hedge funds in general. Still, both trailed the S&P 500's
9.9% gain. Third Point's flagship fund was up 6.4% after fees,
including a 1.7% gain in August.
Investors say successful activist campaigns can create returns that
are independent of broader market conditions.
Mr. Loeb raised his new funds over about two weeks this August. The
amount is one of the largest sums a hedge fund has amassed so quickly,
according to fund experts.
Third Point plans to use the funds to buy up stock in several large
companies in the U.S. and abroad, people familiar with the plans said.
It was unclear Thursday which companies Third Point has homed in on
and whether the hedge fund already has stakes in them.
Third Point's recent reluctance to take money—it even gave back over
$1 billion to investors late last year—likely contributed to the
strong interest, but the fundraising also illustrates investors'
continued appetite for exposure to activists.
Third Point will now manage a new high of $17.5 billion, cementing it
as one of the largest activist investors on Wall Street, past the
roughly $15 billion managed by
William Ackman's Pershing Square and Jeffrey Ubben's ValueAct
Capital Management LP.
Third Point told investors this week that Mr. Loeb hoped to work
constructively with the management teams in his coming activist
The hedge fund received investor requests totaling $3.4 billion, well
over the $1.5 billion the fund had been targeting, Third Point told
investors. The money came from more than 150 investors, nearly all of
them existing clients, one of the people said.
"Managers who can do that are few and far between," said Bob Leonard,
Credit Suisse Group AG’s head of capital services, which
introduces hedge funds to potential investors. "It takes pedigree and
track record to be able to flip the switch and get that kind of
Pershing Square's Mr. Ackman is counting on the current demand to help
fuel his attempt at a $3 billion initial public offering for a fund in
Europe this year to provide more permanent capital.
Pershing Square recently hired
Deutsche Bank AG and
UBS AG for the process, according to people familiar with the
plans. Pershing Square's flagship fund rose 25% in the first half of
the year, according to a letter to investors.
"The popularity of activism as a strategy has increased due to the
potential it offers for substantial returns," Mr. Ackman wrote in a
letter to investors last month.
Similar arguments are being made by other large activists taking in
Trian, led by
Nelson Peltz, Peter May and Ed Garden, raised about $1 billion in
the first half and is on pace for another $1 billion by the end of the
year, according to one person familiar with the fund. Trian's total
assets currently stand at about $10 billion, most of which is
currently in the firm's funds that lock in investors for longer
periods of time, the person said.
Jana's total has risen to $11 billion, according to a person familiar
with the matter, though only a portion of its investing is considered
Elliott Management Corp. received commitments for $3.3 billion from
investors in the span of about three months last year. Elliott
currently manages about $25 billion, with activism part of the total.
Juliet Chung at
firstname.lastname@example.org and David Benoit at