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The radical hedge fund manager Daniel Loeb is facing a challenge from a frustrated investor because he has a dispute over how to operate his UK-listed investment vehicle.
Loeb, known for his opposition to the management of companies such as Sony and Sotheby’s, found himself a target of Asset Value Investors, a London-based company that owns 10.1% of Third Point Investors Ltd.
TPIL is an investment trust managed by Loeb, listed on the London Stock Exchange in 2007, and its trading price is 17.5% lower than the value it holds.
AVI issued a letter on Wednesday complaining about TPIL’s performance and governance, stating that the recent strategic review “seriously lacked the structural changes we deem necessary” to end the discount.
The public quarrel occurred after an intense webinar with investors in February. According to AVI, during this period, Loeb stated that he would not back down to shareholders, “trying to bully or force the board or me to do something that does not belong to Their business is to make quick money for the long-term interests of all our investors.”
Activist investors like Loeb build shares in companies and instigate change, and they themselves are often criticized for short-termism.
Tom Treanor, executive director of AVI, stated that Loeb’s comments were “notable for their hypocrisy and lack of self-awareness.” Treanor claimed that the five-minute recording, including Loeb’s sharpest remarks, was deleted from telephone recordings that were later distributed to investors.
“Third Point removed these comments from the official recording, which shows that either Mr. Loeb is embarrassed by his unprofessional and unintentional frankness of his views on shareholder rights and corporate governance, or his marketing team is embarrassed by their boss. “He says.
AVI operates the £1.2 billion AVI Global Trust, which is widely known among London Investment Trusts because it purchases vehicles that are traded at discounted prices and then tries to push management to close the gap, thereby increasing the value of AVI’s holdings.
“The TPIL board welcomes contact with its shareholders and, as our recent strategic review has shown, values their feedback very seriously,” the company said in a statement to the Financial Times.
TPIL has total assets of approximately US$900 million and allows investors to use Loeb’s Third Point Offshore hedge fund.
The UK investment trust structure was established by Loeb in 2007, when fund managers were eager to attract more permanent capital, and investors usually agreed to lock up their cash for many years. Other hedge fund managers, including Bill Ackman’s Pershing Square and Brevan Howard, followed suit.
AVI’s campaign focused on the continuous discounts over the years of TPIL’s share price compared to its net assets. According to Morningstar’s data, this gap has averaged 16% in the past year.
TPIL’s board of directors completed a strategic review in April to address the issue of discounts. If the trust is still trading at a steep discount, the board of directors has proposed to allow investors to cash out through tender offers in 2024. They also plan to increase the fund’s exposure to private equity from the current approximately 7% to the upper limit of 20%.
AVI believes that TPIL should change its structure to allow investors to redeem its shares at a price close to the net asset value every quarter, and is pushing the shareholders’ meeting to review this measure.
The rising market boosted TPIL’s share price, and at the same time narrowed its widest discount from last year’s close to 30%, and the share price hit a record high.
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