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Hundreds of activists, hundreds of pages of recipes


Source: The New York Times | DealBook, March 13, 2015 article

Activists Crowd Into Bank of New York Mellon Fight

March 13, 2015

Bank of New York Mellon's offices in New York.

Credit Brendan Mcdermid/Reuters.



Bank of New York Mellon is under fire. Again. Marcato Capital Management is seeking to oust Gerald Hassell, chief executive of the $44 billion financial institution. That’s after Nelson Peltz’s activist hedge fund Trian Fund Management secured a board seat. Activism is starting to look like a crowded strategy.

Sotheby’s — where Marcato’s investment preceded that of the activist hedge fund Third Point, whose founder, Daniel S. Loeb, now sits on the auction house’s board — and Darden Restaurants are among the other companies recently set upon by multiple agitators. Sometimes, as with Bank of New York Mellon, they broadly agree on the target’s shortcomings, if not how to fix them.

Aggressive investors force companies to examine their capital allocations, governance and management and to make changes, including buying and selling businesses, that can increase market valuations. As long as the benefits reach all shareholders, the cage-rattlers help bridge the gap between companies and dispersed owners. In that sense, the more the merrier.




Too much clamor at once, however, can distract from sensible initiatives already underway. Marcato’s 118-page critique of Bank of New York Mellon shows that the fund run by Mick McGuire, a protégé of the activist investor William A. Ackman, conducted detailed analysis. That doesn’t mean it adds much to what the bank’s board already knows.

Efforts by Edward P. Garden, Trian’s representative on Bank of New York Mellon’s board, other directors and the current chief executive to identify practical solutions for the basic problem — expenses growing faster than revenue — are probably supported privately by big investment institutions, at least for now. That may matter more than Marcato’s very public contribution.

It’s all a warning sign for investors in activist funds. They’ve done well of late, collecting 21 percent in 2012 and 16 percent in 2013 on average, according to Hedge Fund Research. Even last year’s anemic 6 percent return beat the hedge fund industry average. Yet despite huge gains in 2014 for Ackman’s Pershing Square Capital Management, among others, Hedge Fund Research’s figures for average activist performance have been declining in absolute and relative terms since the 2012 peak.

More than 200 practitioners made demands of almost 350 companies last year, according to Activist Insight, in each case approaching three times the number in 2010. More and more cash chasing a dwindling number of good investment ideas may, before long, turn fund investors into the agitators.

Richard Beales is assistant editor for Reuters Breakingviews. For more independent commentary and analysis, visit


Copyright 2015 The New York Times Company


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