Hedge Funds From Pershing Square to Blue Harbour Win on Activism

Many of the biggest activist hedge funds saw blockbuster returns last year as concentrated wagers on companies from fast-food restaurants to real estate paid off.

Bill Ackman’sPershing Square Holdings Ltd. posted its best performance on record in its publicly traded hedge fund, climbing 58%, while Christopher Hohn’s The Children’s Investment Fund notched itslargest gain since 2013. Funds led by Alex Denner, Clifton Robbins and Jonathan Litt surged more than 30%, according to people with knowledge of the matter.

The funds, which typically take stakes in companies and agitate for change, are finding success even as the pace of shareholder activism cools. Activists launched thefewest campaigns last year since 2015, focusing on larger companies.

Activists, which tend to run fairly concentrated portfolios, are benefiting from the soaring markets. The funds gained about 18% last year on average, according toHedge Fund Research Inc. That’s the best performance for the strategy since 2012 and a turnaround from 2018, when they fell 10%.

At Ackman’s New York-based fund, topcontributors to returns includedChipotle Mexican Grill Inc.,Hilton Worldwide Holdings Inc.,Starbucks Corp.,Lowe’s Cos. and Burger King ownerRestaurant Brands International Inc. London-based TCI Fund’s 41% gain was helped by investments incompanies such asCharter Communications Inc. andMoody’s Corp., which both surged about 70%.

Denner’sSarissa Capital Management, the $1.2 billion firm that focuses on health care, soared about 37% in 2019 in its main fund. Performance was driven by an investment inMedicines Co., whichreached a deal withNovartis AG that helped push the stock up more than 300% last year.

Robbins’s $2 billionBlue Harbour Group jumped 33% last year, driven by long wagers onMadison Square Garden Co., whichapproved a plan in November to spin off all of its sports business, and Canadian software companyOpen Text Corp. The firm, based in Greenwich, Connecticut, also benefited from two midyear buyouts:Genesee & Wyoming Inc., a railroad operator that agreed in July to beacquired byBrookfield Asset Management Inc., andBCA Marketplace Plc, the online used-car seller acquired byTDR Capital.

Litt’s Land & Buildings Investment Management surged about 31% due to wagers on real estate investment trusts such asLiberty Property Trust, which rivalPrologis Inc. agreed tobuy in October, and QTS Realty Trust Inc. Both rose more than 40% last year.

Here’s a look at how some other activist funds fared in 2019:

  • Jana Partners posted a 52% gain, benefiting from a jump in shares ofConAgra Brands Inc., its largest portfolio holding. The firm, run by Barry Rosenstein, said last year that itplanned to close two of its flagship funds to focus solely on activist investing.
  • Sachem Head Capital Management, which has more than $3 billion in assets, notched a 22% return. The firm was founded in 2012 by Scott Ferguson, a former partner at Ackman’s Pershing Square.
  • Voce Capital Management rose about 12% after launching a successful campaign involving insurer Argo Group International Holdings Ltd. The firm, founded in 2011 by J. Daniel Plants, also won on its passive investments.

Representatives for the firms declined to comment.

— With assistance by Hema Parmar, and Nishant Kumar

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