Activist Investor Takes Issue With Dillard's; Signs Indicate Upcoming Proxy Battle

by Mark Friedman  on Monday, Mar. 3, 2008 12:00 am  

"I like to describe these activist hedge funds as sort of value investors on steroids," McGurn said. "They're trying to find companies that they think are underperforming but have a good underlying business."

As soon as these activist investors invest in a company, the stock price usually rises, he said. "And so it's one of those strategies that have proven to be a winner," McGurn said, "not only for the investors that invest with these particular hedge funds, but obviously for the people who run these hedge funds and receive their fees as a percentage of the gains that they make."

The shareholder activist who lands on a company's board generally is a positive force in the company, said Amy Borrus, deputy director of the Council of Institutional Investors of Washington, D.C. She said having an activist on the board shows that the investor is trying to improve the company.

"You don't get a seat on the board unless you plan to be with the company for a while," Borrus said. The board members "are making a long-term commitment to the company. Andy they're not just doing it to make a quick buck."                               n



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