Fund manager Henderson Global Investors has added an activist arm to its equity business. The company is taking an approach to activist investment based on 'constructive active engagement' through making long term investments aimed at supporting management through periods of strategic change. It will launch the Henderson Active Engagement Fund later this year.
The Fund will invest in the shares of listed companies that have sustainable businesses but whose stock market valuation is adversely affected by strategic, structural or governance issues. Through active engagement with companies, Henderson will seek to act as a catalyst for change to enhance shareholder value. The strategy is intended to be consistent with the principles of good stewardship.
To be successful, activist investors must be able to build credibility with the management and boards of investee companies. This requires that the team involved in the engagement can genuinely provide practical experience of turning around underperforming businesses. To this end Henderson has entered into a non-exclusive agreement with professional services firm, PricewaterhouseCoopers LLP.
Under the terms of the agreement PwC will provide the fund access to over 850 business recovery professionals and a panel of over 250 highly experienced independent turnaround directors.
Andrew Formica, head of equities says, "To generate returns for clients the focus for us is to invest in companies that, whilst fundamentally sound, are nevertheless underperforming. From here, our approach as an activist investor is to engage constructively with a company's management and work with them over a period of time to provide a framework for change."
The Fund will be managed by an investment committee consisting of:
- John Havranek, who has this month joined Henderson from the Business Recovery side of PwC where he was responsible for deal origination.
- Andrew Formica, head of equities at Henderson. He is responsible for overseeing the management of all of Henderson's equity assets.
- Stephen Peak, head of Henderson's 11 strong European equities team and lead manager on a number of client mandates encompassing Henderson Hedge Funds and Long only portfolios.
John Havranek says: "Activist investing has existed in the US for many years growing significantly from the mid 1990s, and is starting to be referred to as a new asset class. In spite of the evidence of superior returns, activist investing is at an early stage of development in Europe.
"Through the agreement with PwC and the combined practical experience in investment, engagement with companies and turning businesses around, Henderson is now in a unique position to make such a strategy available to investors, on a pan-European basis, with access to an unrivalled level of resources."
Andrew Formica adds: "This is an exciting move in that not only are we using our experience in managing over £25 billion in traditional long only funds and hedge funds but, in this case as an activist investor, we are truly acting as an owner of the business on behalf of our clients. This move demonstrates Henderson's commitment to developing high value-added, specialist investment capabilities in innovative ways.
"John's unique experience in both investment and business recovery, and the depth of knowledge of the turnaround directors will provide us with a key competitive advantage in managing and deriving value for clients, as well as providing constructive and valuable advice and support for the businesses in which we invest."
The fund will initially look for pan-European listed companies in the £100m to £1bn market capitalisation range. Following extensive screening the fund will seek to hold significant minority stakes in 10-15 companies. The fund size is a minimum of £100m rising up to a maximum capacity of £500 million.
As change programmes take time to implement the investment time horizon is likely to be up to three years with a commitment from investors in the fund of a similar period.