The Daily Stat: Activist Hedge Funds Often See Their Gains Wiped Out by Costs

 

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June 17, 2013 Activist Hedge Funds Often See Their Gains Wiped Out by Costs Because of the high cost of mounting a proxy fight, the average hedge fund makes less money on its activist investments than on its nonactivist portfolio, Nickolay Gantchev of the University of North Carolina discovered in a study of 1,164 campaigns by 171 hedge funds. A few do score big: A small minority of firms earns twice as much through activism as from nonactivist investments. But on average, the mean $10.71 million cost of a campaign ending in a proxy fight (think of all that printing and mailing) wipes out abnormal gains. SOURCE: The costs of shareholder activism: Evidence from a sequential decision model

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