Institutional Investor's Alpha Magazine - February 2008 - (Page 6)

ing shareholder activist in the country, according to FactSet SharkWatch, which tracks proxy fights. Since 1999, Ramius has targeted 45 companies and waged 21 formal proxy ﬁghts. “They are willing to step up and put up their money,” says John Laide, product manager for FactSet and an admirer of Ramius’s moxie. According to FactSet, 501 campaigns for corporate control were announced last year, a 17 percent increase over 2006, and hedge funds participated in 54 percent. “If you are not willing to go to the end, you are blufﬁng,” says Jeffrey Smith — who along with Mark Mitchell runs the Starboard Value & Opportunity Master Fund, which takes most of Ramius’s activist positions. Activist positions are a small but important part of Ramius’s overall strategy. Starboard accounts for $500 million of Ramius’s $10 billion in assets. Smith says Ramius generally looks for undervalued companies with market capitalizations of $200 million to $1.2 billion. It typically holds 20 to 30 individual issues. “We often work with management to unlock value,” he notes. “As a last resort, we take matters into our own hands.” Smith thinks smaller companies are better suited for the Ramius strategy because they are more likely to ﬁt the proﬁle of the ideal target: a strong core enterprise that diverts cash ﬂow into weaker, money-losing busi- nesses. “The opportunities we ﬁ nd best are where the company continues to fund the losses in a strategy that is not working,” he says. One example is Ramius’s investment in Phoenix Technologies, an early developer of BIOS, the software that runs the start-up sequence on computers. Ramius originally bought Phoenix shares in November 2005, when they were trading at about $4 apiece. Smith says that after that, the company made a money-losing move into computer security software. As a result, in June 2006, Ramius offered to buy the entire company for $5.05 a share but was turned down. In January 2007 the ﬁrm upped its offer to $5.25 a share while also launching a proxy ﬁ ght, nominating two directors to Phoenix’s board. The two parties eventually hammered out a compromise in which Ramius dropped its proxy ﬁght and stopped its buyout efforts, and Phoenix agreed to put one of the hedge fund’s nominees on its board. The company also agreed to one mutual appointment to its board and subsequently brought in a new management team, led by Woody Hobbs. In mid-February the stock was trading at $15. Last April, Ramius took on Cleveland-based Lamson & Sessions, a maker of wireless devices, challenging the company’s strategy of expanding through acquisition. Ramius moved to name two board members, but pulled InvestorForum When it comes to the consulting ﬁrms and advisers they rely on for help with their investment decisions, many institutional investors are taking a one-stop approach. Of the respondents to our latest InvestorForum survey that use advisers for investments in traditional asset classes as well as hedge funds or funds of hedge funds, nearly three quarters rely on the same adviser for both. What type of institution do you represent? Corporate pension fund Public pension fund Taft-Hartley pension fund Endowment Foundation Other What is the size of your fund? More than $5 billion $2.50 billion to $5 billion $1 billion to $2.49 billion $500 million to $999 million $100 million to $499 million Less than $100 million big is your hedge fund allocation? 26 to 50 percent 10.6 16 to 25 percent 27.7 11 to 15 percent 17.0 6 to 10 percent 23.4 Less than 6 percent 21.3 Do you currently use an investment consulting ﬁrm to help you with your overall investment manager selection? Yes 78.5% No 21.5 to advise on the selection of traditional asset management ﬁrms? Excellent 37.5% Good 41.7 Average 18.1 Poor 2.8 How would you rate the ability of the consulting industry to advise on the selection of hedge fund and funds of hedge fund managers? Excellent 30.0% Good 38.0 Average 26.0 Poor 6.0 If you invest in hedge funds or funds of hedge funds, and you use a consulting ﬁrm, how would you rate the quality of advice you receive? Excellent 51.2% Good 39.0 Average 9.8 Poor 0.0 Do you regard the investment advice you receive from your consulting ﬁrm to be impartial? Yes 84.3% No Don’t know 5.7 10.0 18.8% 17.5 0.0 51.3 3.8 8.8 10.0% 5.0 25.0 13.8 25.0 21.3 If you invest in hedge funds or funds of hedge funds, do you use a consulting ﬁrm to help you with your hedge fund manager selection? 80.9% Do you currently invest in hedge funds Yes No 19.2 or funds of hedge funds? Yes 62.0% If you simultaneously invest in hedge No 38.0 funds or funds of hedge funds and If you answered “no” to the previous traditional asset classes, and you use a consulting ﬁrm for both, do you use question, are you considering the same one? investing in hedge funds or funds of Yes 72.5% hedge funds in the future? 27.5 Yes 30.0% No No 70.0 As a whole, how would you rate If you do invest in hedge funds, how the ability of the consulting industry Without knowing any other details, which of the following would you regard as a potential conﬂict of interest for an investment consulting ﬁrm advising on hedge fund manager selection? (Check all that apply.) The consultant has a broker-dealer through which the hedge fund manager executes trades. 92.0% The consultant takes placement fees from the hedge fund manager. 97.3 The consultant provides strategic business advice to the hedge fund manager. 72.0 The consultant runs its own fund of hedge funds with client money. 81.3 The consultant charges higher fees for advice on hedge fund manager investments than it does on traditional managers. 21.3 * Responses may not total 100 percent because of rounding. 6 • INSTITUTIONAL INVESTOR’S ALPHA • FEBRUARY 2008

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - February 2008

Institutional Investor's Alpha Magazine - February 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Alternative Perspective The Good Guys: A Simple Plan Cover Story: Energy and Commodities: Fueling Opportunity Regulation: Energy Trading: The Brawl on the Hill Interview: Master of Values Regulation: Hedge Fund Registration: Way Out West Research Center: Top Hedge Fund Analysts Alpha Bytes: Rocket Man Unhedged: Commentary: Structured for Success

Institutional Investor's Alpha Magazine - February 2008

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