manager speaks of tackling bad corporate governance and defending shareholder interest
Investors not taking an activist stance to their holdings in emerging markets such as Russia are acting "dangerously if not irresponsibly" according to William Browder, managing director of Russian hedge fund Hermitage Capital Management.
Browder said agitating was vital to tackle corporate governance and outright theft from some firms. Those who did not take this approach "should be ashamed of themselves.
"I find it amazing everyone talks about governance but when it comes to stepping and fighting for their clients' money it is only the people with incentive fees who are acting as proper fiduciaries."
He said long-only investors were more concerned with their own corporate brand than clients' money.
"If you are a mutual fund, being an activist is bad because you are trying to keep your name out of the papers. The Fidelity's and JP Morgan's of the world generally do not join us (in agitating)," said Browder.
"There is one very clear formula for what defines an activist - a person who is either acting as a principal themselves, or is earning a performance fee.
"There, the incentive of making a change for the (investing) client far outweighs the cost of... hurting the franchise value of your firm by being in the newspaper."
Hermitage has just published its fourth dossier on Gazprom, and narrowly failed to win board membership to push for change.
Other high profile activism recently have been Polygon's activity around British Energy, and the very public spat between The Children's Investment Fund's Christopher Hohn and Deutsche Börse (DB). It was believed other funds Seneca, Jana, Lone Pine, Third Point, Harris and Parvus, which together held 59% of DB's shares were also involved in the spat, and Hohn even drew the anger of Man Group's chief executive Stanley Fink, who reportedly dubbed TCI a "big, naughty boy".
But it is not only well-known agitators taking up active engagement with holdings.
John Bennett, director at GAM, said: "In Europe, hedge funds are helping to change management or to agitate for change. At the small-cap end we have helped influence dividend distribution policies in two recent cases in Germany."
William Browder says that investors who do not actively use their shareholdings to push companies into better corporate governance 'should be ashamed of themselves'.
Fear of public exposure is usually a key factor keeping fund managers from speaking out against mismanagement.
According to John Bennet of GAM, European hedge funds have been proactively pursuing badly managed companies.
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