Activist investing is an investment approach whereby an investor seeks to influence the strategy of a company. Strategy may be very broadly defined to include acquisitions, divestitures, capital structure, dividend policy and board composition, inter alia.
We see two broad aspects of this strategy that may exist separately or together. First, activist investing may seek to remedy conflicts of interest in corporate governance. Secondly, it may be seen as a derivative strategy of value investing that attempts not only to identify undervalued companies, but also to engage those companies to pursue actions that will realize shareholder value.
We believe activist strategies should be considered as a part of investors’ equity portfolios.