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Activists Crowd
Into Bank of New York Mellon Fight
March 13, 2015
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Bank of New
York Mellon's offices in New York.
Credit Brendan Mcdermid/Reuters.
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Bank of New York Mellon is under fire.
Again. Marcato Capital Management is seeking to oust Gerald Hassell, chief
executive of the $44 billion financial institution. That’s after
Nelson Peltz’s activist hedge fund
Trian Fund Management
secured a board seat. Activism is
starting to look like a crowded strategy.
Sotheby’s —
where Marcato’s investment preceded that of the activist hedge fund Third
Point, whose founder, Daniel S. Loeb, now sits on the auction house’s board
— and Darden Restaurants are among the other companies recently set upon by
multiple agitators. Sometimes, as with Bank of New York Mellon, they broadly
agree on the target’s shortcomings, if not how to fix them.
Aggressive
investors force companies to examine their capital allocations, governance
and management and to make changes, including buying and selling businesses,
that can increase market valuations. As long as the benefits reach all
shareholders, the cage-rattlers help bridge the gap between companies and
dispersed owners. In that sense, the more the merrier.
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Breakingviews
By
RICHARD BEALES |
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Too much
clamor at once, however, can distract from sensible initiatives already
underway. Marcato’s 118-page critique of Bank of New York Mellon shows that
the fund run by Mick McGuire, a protégé of the activist investor William A.
Ackman, conducted detailed analysis. That doesn’t mean it adds much to what
the bank’s board already knows.
Efforts by
Edward P. Garden, Trian’s representative on Bank of New York Mellon’s board,
other directors and the current chief executive to identify practical
solutions for the basic problem — expenses growing faster than revenue — are
probably supported privately by big investment institutions, at least for
now. That may matter more than Marcato’s very public contribution.
It’s all a
warning sign for investors in activist funds. They’ve done well of late,
collecting 21 percent in 2012 and 16 percent in 2013 on average, according
to Hedge Fund Research. Even last year’s anemic 6 percent return beat the
hedge fund industry average. Yet despite huge gains in 2014 for Ackman’s
Pershing Square Capital Management, among others, Hedge Fund Research’s
figures for average activist performance have been declining in absolute and
relative terms since the 2012 peak.
More than
200 practitioners made demands of almost 350 companies last year, according
to Activist Insight, in each case approaching three times the number in
2010. More and more cash chasing a dwindling number of good investment ideas
may, before long, turn fund investors into the agitators.
Richard
Beales is assistant editor for Reuters Breakingviews. For more independent
commentary and analysis, visit
breakingviews.com.
Copyright 2015
The New York Times Company |