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Activist Investing For The Masses

I think that activist or event driven related strategies will become available to retail investors either in open ended mutual fund or exchange traded fund format in the near future. ETFs typically target "Beta" opportunities and activism/event are much more geared towards "Alpha." Hence, some out-of-the-box thinkers may grasp the opportunity to create a vehicle that offers access to activist strategies.

Activism has made headlines with the bout between Carl Icahn and Bill Ackman brewing and recent David Einhorn comments with regards to unlocking value in Apple shares. These are but a few activist investors that have the patience and persistence to inflict change within a company's core and unlock shareholder value or in some cases destroy it by going short certain names.

13D filings are those that any investor acquiring 5% or more of a company's outstanding share count must file with the SEC within 10-days of such occurrence. Typically, those acquiring 5% or more of a company's share count either want to take over a company or exert influence to make change happen and influence other shareholders and board members on certain initiatives to unlock shareholder value.

I believe there is one ETF company that has filed for registration of an Activist strategy (Global X) but it has yet to come to market ( It is just a matter of time before we see something come to fruition as potential demand for such a "democratized" version of activism is addressed by ETF manufacturers. The key will be behind the methodology around who to watch, what to own, how much to weight and how proxies will be voted. The proxy voting cannot be underestimated as it is a critical success driver for being an activist shareholder. Fees and liquidity will obviously be important factors to consider as well.

One quick comment on replication is that it can be very hard to isolate the alpha as ultimately one would own specific and sometimes more concentrated holdings in an activist strategy. Hence, replication strategies may capture more "noise" than the true alpha drivers. By definition replication strategies rely on capturing Beta factors and are not suitable for strategies that are more reliant on alpha drivers or that have a high degree of statistical noise - read high error terms or low r-squared statistics. In the open end mutual fund space there is currently only one offering currently. There is probably more room for competition as demand for activist and other event driven strategies gain momentum.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: I am currently conducting a manager search to deliver a concentrated/best ideas activist and/or event driven long equity strategy to include in asset allocation portfolios.The link to the SEC filing for the ETF product is made for informational purposes only and should not be interpreted as an endorsement or recommendation to buy or sell and security.The information and opinions contained in this document have been compiled or arrived at from sources believed to be reliable, but no representation or warranty, express or implied, is made as to their accuracy, completeness or correctness. The views and opinions are the author's only and may or may not reflect the views of Point Guard Capital LLC. This document is for informational purposes only and is not, and should not be construed as, an offer or a commitment to enter into a transaction, nor is it professional advice. This information is general in nature only and does not take into account an individual’s personal circumstances. All opinions expressed in this document are subject to change without notice. The author does not accept any liability whatsoever for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection therewith.