London-based hedge fund The Children's Investment Fund has sold its position in railroad operator CSX and will resign the board seat it gained after a long court battle last year. This "defeat" for TCI demonstrates the difficulty investors of all stripes, even the most sophisticated and deep-pocketed, have in advocating change at traded companies.
BreakingViews writes, "the top brass at CSX demonstrated an unwillingness to take criticism or suggestions from a substantial shareholder — the kind of parochial response that other investors should find worrying." Agreed.
However, BreakingViews goes on to say "if hedge fund activism is indeed on the wane, then shareholders looking for a more enduring advocate for their interests may need to do the job themselves. Come to think of it, that wouldn’t be such a bad outcome after all." Disagreed.
If hedge funds cannot be effective activists, how in the world can anyone on Main Street be an effective voice for change? What are individuals supposed to do? Show up at annual meetings and grab the microphone? Yeah, right.
View the story from BreakingViews.
View the story from The Journal of Commerce.
View the story from DealBook at the New York Times.
Monday, April 20, 2009
April showers have brought a bloom of recent op-ed articles by prominent hedge fund managers. Mark-to-market accounting, regulation of financial services, executive compensation and corporate governance are the subject of articles written by the likes of James Chanos, Carl Icahn and Paul Singer in the Wall Street Journal and New York Times.
These are high-profile and important pieces because they demonstrate how the interests and opinions of the hedge fund industry are aligned (in these cases) with the best interests of the country. Icahn argues that shareholders should have more influence and that it should be easier to replace corporate boards. Who would disagree? Chanos writes that while mark-to-market accounting isn't perfect, it is an important contributor to integrity of financial statements. Seems logical. Paul Singer, head of Elliott Management, writes that "private responsibility and practical government regulation will help ensure that the capitalist system continues to be a source of opportunity and prosperity throughout the world." Sounds reasonable.
Articles like these, appearances on CNBC, and meeting with lawmakers are important steps in publicly aligning the interests of the hedge fund industry with the economic recovery and the creation of a well-functioning marketplace that this blog calls the New Financial World Order.
See also Andy Kessler's op-ed on bear raids that provides good perspective on the shorting of financial companies.