THE BOTTOM LINE
So what exactly is your new ‘activist fund’, Magda?
Intentionally buying stakes in companies with weak management, weak governance and weak strategy?
Listed investment house Sygnia’s plan to launch an “activist fund” – which will intentionally buy stakes in companies with weak management, weak governance and weak strategy – is an interesting approach to investing.
Rather than buy good companies, the plan is to effect positive change at bad companies, off which Sygnia will then profit.
While this particular strategy is somewhat unusual, all funds should be activist funds. That is, fund managers should be active participants in the companies in which they own shares, campaigning against poor corporate governance or behaviours that obviously undermine social justice and the condition of the environment.Disappointingly, many institutional investors are all too willing to enjoy share price returns that come at the expense of environmental, social and governance (ESG) issues.
That is, until it blows up in their faces, as happened with Steinhoff. Fraud aside, there had been concerns for years over the company’s unwieldy books and its corporate governance.
While Sygnia’s activist fund has a fairly limited investment mandate, one would hope that all funds are “activist” in the broader sense of the word.
There is no guarantee that, as Sygnia CEO Magda Wierzycka hopes, engagement with company management will unlock value. The fund may routinely underperform if Sygnia fails to coerce companies into changing their ways. In any event, it is likely to be a long-term play.
It is worth noting that it will be a hedge fund. So if all else fails, there’s always aggressive shorting to resort to.