RWC launches European activist fund as corporate governance standards found lacking
Investors eyeing off investment returns from improving corporate management in Europe has led RWC to make use of the team it recruited from Hermes recently to launch an offshore equities activism fund, focused on the Continent.
The fund will be run by the European Focus team, led by Maarten Wildschut and Petteri Soininen, that recently joined the London boutique from institutional manager Hermes.
The six-member team has worked together since 2009 and currently runs about $300m in what the firm describes as a ‘constructive activist’, pan-European fund.
The new fund will hold 10 to 20 companies and combine elements of value-based, private equity and event-driven investing.
Dan Mannix, principal of RWC, said: “The launch of a Cayman vehicle reflects the desire of investors to access the strategy efficiently. The team’s move to RWC has also coincided with a marked increase in institutional interest in European equities, particularly in concentrated high conviction portfolios.”
Activist strategies have enjoyed mixed success since 2009, according to the index tracking investable activist funds from data providers Hedge Fund Research.
In 2009 the community managed an extraordinary 44.2% return, followed by 15.1% in 2010. These easily outperformed the average hedge fund. However, activists then lost 16.9% in 2011, over triple the hedge fund industry’s average loss that year.
This year shareholder activism has reaped results particularly in the field of pay at multi-national corporations, according to consultants Mercer, which rates reappraisal of pay as the single biggest trend in the field of engagement.
However, the consultants say it is primarily public and government-led pressure that has been forcing change.
Mark Hoble, partner in Mercer’s executive rewards team in the UK, said: “The speed of public comment and reaction means that company pay policies, which were defined according to criteria which may have been valid a year – or even months – before, might now attract intense public scrutiny and criticism. Legislators and companies are being forced to improve their responsiveness.”
He said companies in Switzerland, Netherlands, Germany, Italy and Ireland have “all been on the receiving end of votes against their executive compensation proposals,” defying Mercer’s prediction of a 3% median increase in base pay in Europe in 2013.
“Pay freezes remain common in countries such as Spain, Greece and Italy. Pay is being used as the mechanism for shareholders to convey their discontent over company performance a trait that is spread across all industry sectors. The UK’s ‘shareholder spring’ quickly lead to the EU announcing that they would be looking at the design of pay elements, not just providing guidance on pay philosophy,” the consultants said.