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Alternative Market Briefing

Moody’s reports that activist hedge funds will pursue larger targets

Thursday, February 21, 2013

Beverly Chandler, Opalesque London: Research and analysis firm Moody’s Investor Services reports that activist hedge funds are likely to pursue larger targets in 2013.

The report found that the current financial climate is favourable towards activist investing. "Record cash on corporate balance sheets, a ready supply of inexpensive debt and increased shareholder risk appetite given the low interest rate environment are just a few of the contributing factors" Moody’s wrote.

2012 saw activists take high-profile positions in large cap companies including Canadian Pacific Railway, Adobe Systems, Forest Laboratories and Procter & Gamble. Trian Fund Management, the hedge fund run by Nelson Peltz, has been vocal in pushing for changes at State Street and Lazard, in which his fund took a 5.1% stake in last year.

The activity has not subsided going into 2013. Greenlight Capital’s founder David Einhorn has filed a lawsuit against Apple in a bid to get the technology giant to issue preferred stock in order to return its $137bn cash stockpile to investors.

The report warned issuers most at risk from activist pressure were those with poor financial and stock price performance, multiple business lines that could be sold or spun off to unlock value and those that activists believed had entrench......................

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