Two new studies reveal secret sauce used by activist hedge funds

Aug 28th, 2007 | Filed under: Academic Research, Hedge Fund Industry Trends | By:
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In a follow-up to Monday’s posting about the impact of hedge fund activism, here are two recent studies that seem to support the OECD’s claim that activist hedge funds are good for corporate governance.  Both of them reveal some of the secret sauce that can make activist hedge funds so tasty.

The first study, by Nicole Boyson and Robert Mooradian of Northeastern University concludes that – contrary to previous findings – activist hedge funds actually do accompany improved business performance.  The researchers cite earlier research that finds activist investors (pensions and mutual funds, not hedge funds) are largely unable to create operational change and instead opt for governance improvements and a reduction of agency costs associated with management teams squirreling away too much cash.  They say the inability to enact changes is often the result of a lack of resources dedicated to activism, political roadblocks, and inexperience actually running companies.

However, Boyson and Mooradian find that activist hedge funds seem to be able to make things work where traditional activists have not.

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  1. [...] All About Alpha on the “secret sauce” employed by activist hedge fund managers. [...]

  2. [...] But is this characterization accurate? AllAboutAlpha discusses two academic studies, both of which conclude that hedge funds are more effective activists than either institutional investors or individuals. [...]

  3. great info!! I will quote it extensively in my thesis on hedge fund secrets. 2 books I also used were Hedge Fund Trading Secrets Revealed..by Robert Dorfman and Confessions of a Street Addict by Jim Cramer… both deliver great stuff if hedge fund secrets interest you also

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