Wall Street Journal, April 16, 2015, letter from Jeffrey Sonnenfeld of Yale School of Management: "The Trian Fund Protests Too Much," responding to Wall Street Journal, April 9, 2015 letter from Ed Garden of Trian Funds: "We Activists Have Beaten the S&P" [Distinguishing between activist's management of investment funds and management of enterprises]

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For the initial statements of Professor Sonnenfeld in response to the television interview of Trian's Nelson Peltz, and for Professor Sonnenfeld's original op-ed commentary on the broader issue of activist fund managers' performance as enterprise managers, see

April 2, 2015 CNBC: "Peltz vs Sonnenfeld over activist fund performance" [Activist disputes professor's analysis of performance]
April 1, 2015, Jeffrey Sonnenfeld of the Yale School of Management, published opinion in The Wall Street Journal: "Activist Shareholders, Sluggish Performance" [Observation that average corporate investments generate higher returns than activist funds]

Sources: Wall Street Journal, April 16, 2015 letter responding to Wall Street Journal, April 9, 2015 letter

THE WALL STREET JOURNAL. | Opinion

Letters

The Trian Fund Protests Too Much

DuPont’s soaring current performance predates any Trian involvement.

April 16, 2015

I want to correct any misconceptions from Trian CIO Ed Garden’s April 10 letter regarding my April 2 op-ed “Activist Shareholders, Sluggish Performance.” I am more focused on the mediocre performance following Trian Fund Management’s board service than its investor success. An investor should care what happens beyond the media drama of the initial investment’s stock pop.

The entire costly, distracting DuPont proxy battle is over Trian founder Nelson Peltz’s requirement that he or his principals serve on the DuPont board. So what happens when they join boards? Five out of 11 boards Trian has joined since Trian’s inception well underperformed the S&P 500 during the period of its service.

Trian had multiple disasters in the chemical industry, including when, in 2009, it quit the board of chemical company Chemtura a week before Chemtura declared bankruptcy.

While DuPont’s proxy battle isn’t about how Trian performs as an investor, looking over the past three years, Trian’s cumulative returns at 54% are far below the S&P 500 at 74.6% and far lower than several leading activist funds. That is not cherry-picking random years. Trian filed an SEC correction April 3 on Mr. Peltz’s performance overstatement.

DuPont’s soaring current performance predates any Trian involvement. Does Trian want to suggest it inspired DuPont’s engine of innovation through history such as nylon, rayon, Teflon, Mylar, Neoprene, Tyvek and Lycra?

This 212-year-old global icon is one of the top three largest, most profitable, efficient, integrated chemical companies in the world, whose continuing innovation, employment and economic contributions should be celebrated, not hacked up in fire-sale auctions.

Prof. Jeffrey A. Sonnenfeld

Yale School of Management

New Haven, Conn.

Letters

We Activists Have Beaten the S&P

We have generated a return of approximately 137% net of fees since inception, outpacing the S&P 500.

April 9, 2015 4:16 p.m. ET

Jeffrey Sonnenfeld’s April 2 op-ed “Activist Shareholders, Sluggish Performance” misrepresents data to present a misleading picture of Trian’s performance. The fact is we have generated a return of approximately 137% net of fees since inception, outpacing the S&P 500 by approximately 2,900 basis points. Shareholder returns for Trian portfolio companies on which Nelson Peltz served or serves on the board, from the day we invested until today, outperformed the S&P 500 by an average of almost 900 basis points annually.

Mr. Sonnenfeld’s selective use of data is blatant in citing Trian’s returns for 2014 and 2012—but not including 2013. Not only is his 2014 figure wrong (our return was actually 11% net of fees), but he omits 2013 when we were up 40% net of fees, significantly outperforming the S&P 500.

Mr. Sonnenfeld also leaves out context for DuPont’s share price performance. As detailed in our white paper, we believe this performance is largely due to a cyclical recovery and Trian’s involvement, not DuPont’s earnings which are down since 2011. We don’t believe it’s a coincidence that the two days of greatest DuPont stock price outperformance versus the S&P 500 since 2009 were the day news first broke that Trian had invested in DuPont and the day Trian released its white paper.

Trian takes pride in working constructively with companies to create shareholder value. That is why we have nominated four highly qualified candidates for election to DuPont’s board. DuPont can be great again, but it will require eliminating excessive corporate costs, bureaucracy and management rhetoric—and bringing the highest level of accountability to the boardroom.

Ed Garden

Founding Partner and Chief Investment Officer

Trian Fund Management, L.P.

New York

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