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Source: The Wall Street Journal MoneyBeat, October 29, 2014 article

THE WALL STREET JOURNAL   |

 MARKETS & FINANCE



2:55 pm ET
Oct 29, 2014

Hedge Funds

Activist Investors Are Selling Faster

 

By David Benoit

Activism isn’t going away, but the activists may not hang around too long.

Activist investors in the U.S. are cashing out of their holdings faster than in the past, according to a survey from law firm Schulte Roth & Zabel. The study found plenty of reasons to expect that activism will continue to be a force in the market — 98% of those surveyed globally said they expect some sort of increase in activism. But the nugget on holding periods could inflame activists biggest naysayers.

The study said that only 36% of U.S. activists said they have an average holding period of at least one year, down from 60% last year. The biggest chunk of respondents, 48%, said they average six months to a year for each holding. And 16% say they hold less than six months.

In the study, Schulte’s David Rosewater, among the leading attorneys who represent activist hedge funds, said it wasn’t entirely clear what led to the shift, though he pointed toward activists winning the fights they pick with companies faster than in the past.

“If it takes less time for the companies to respond to activist demands with appropriate changes and those changes then are reflected more quickly in the stock price, logically, holding periods would fall in response,” Mr. Rosewater said in the study.

In another section, the survey found both activists and corporate respondents predicting greater investor support for activist campaigns.

But no matter the reason, activists have spent years trying to combat the argument they are short-term investors whose ideas are not good for long-term investors. Academic studies, high-profile lawyers and billionaires have duked it out over the veracity of that claim.

Activists argue they are good for long-term holders and often say they are around as long as most CEOs. Several studies have found the average activism target beats the market over three and five years. But a debate has now erupted in the industry as to whether average returns are a fair measure.

In this context, a statistic saying a majority of activists say their average holding period is less than a year could add draw some attention.

 

Copyright ©2014 Dow Jones & Company, Inc.

 

 

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