Institutional Investor's Alpha Magazine - July/August 2008 - (Page 26)

Atlantic Investment Management lexander Roepers is a big believer in accountability. As president and portfolio manager of Atlantic Investment Management, a $4.2 billion New York–based hedge fund ﬁrm, he expects the managements of the companies in which he invests to do right by shareholders. When it comes to his own operation, he is no less demanding. Unlike most hedge fund managers, who are notoriously secretive even with their own limited partners, Roepers holds meetings for his investors in the U.S., Europe and Japan several times each year — “rain or shine,” he says — to report on how Atlantic Investment is doing. At an investor luncheon on June 17 at New York’s Pierre Hotel, he began by apologizing — not for his ﬁrm’s performance (its ﬁve funds were all doing better than the broader market), but because many investors probably had heard the gist of his remarks before. Roepers has been talking for years about many of the same stocks — unsexy names like mining equipment maker Joy Global and printer R.R. Donnelley & Sons Co. — and his theme never changes: Buy very low, sell slightly higher. Roepers went on to contrast his ﬁrm’s style of activism with that of the Children’s Investment Fund (UK), known as TCI, which remains embroiled in a bitter proxy battle with CSX Corp. to wrest control of the railroad company’s board of directors from its management. “I’m glad that TCI and the others are out there,” Roepers told his 130 guests. “They want the same things we want — to enhance and accelerate the process of share value creation. The question is, How do you go about it?” Unlike TCI’s high-proﬁle founder, Christopher Hohn, Roepers has no interest in obtaining board seats and prefers liquidity over control. “I don’t understand why anybody would want to be on anybody’s board as an active shareholder,” he says. “Once you’re on it, you cannot sell.” Roepers calls himself a “constructive” shareholder activist. He doesn’t want to be confused with the hordes of confrontational managers who clamor for board seats, badmouth CEOs and send scathing notes to company managements. Born and raised in the Netherlands, the 49-year-old Roepers has a European courtliness that, if nothing else, makes it easier for corporate executives to listen to his suggestions on how to run their companies better. “I don’t know any other shareholder like Alex in terms of the effort he makes and the interest he takes in getting to know the company, the business and the individuals,” says Peter Bakker, CEO of TNT, a Dutch company that runs Europe’s equivalent of Federal Express and is a longtime core Atlantic Investment holding. Roepers sometimes likens himself to a McKinsey consultant, the key difference being, of course, that no one at any of the companies he targets has asked for his help. Trim and athletic, with deep-set blue eyes and light brown hair, Roepers brims with the self-conﬁdence that comes from a keen intelligence (he was one of only two college graduates from the Netherlands to be accepted by Harvard Business School the year he applied) and a competitive nature that has found outlets in skiing, tennis, ﬁeld hockey and, in recent years, yacht racing (see page 28). Although he may lack the publicity-seeking instincts of TCI’s Hohn or the caustic wit of Daniel Loeb, the manager of New York–based Third Point Partners who is known for his poison-pen letters, Roepers is no pushover. On occasion he has publicly challenged CEOs, sometimes using 26 • INSTITUTIONAL INVESTOR’S ALPHA • JULY/AUGUST 2008 the ﬁnancial press to present his side of the story. In the fall of 2002, he complained to Barron’s that David Murdock, then chairman and CEO of Dole Food Co. and its biggest shareholder, was trying to enrich himself by offering to take the food conglomerate private at $29.50 a share, a 20 percent premium to its then–share price. Although Roepers, who owned 6 percent of Dole, lost his argument that the company should remain public, he kicked up enough of a ruckus that Murdock agreed to pay stockholders $33.50 a share when he took Dole private in March 2003. But such public disputes are rare. Typically, Roepers works behind the scenes, offering his recommendations in phone calls and face-to-face meetings with top management, which he follows up with letters outlining his proposed changes. Despite his low proﬁle, Roepers commands attention. Because his ﬁrm tends to buy sizable stakes — usually 2 to 7 percent of a company’s stock — he can assume the role of, well, a Dutch uncle ready to advise CEOs about how to get their businesses back on track, usually through some combination of spin-offs, sales of nonessential subsidiaries, share buybacks and dividend hikes. Roepers’s brand of activism has proved effective. Atlantic Investment’s oldest hedge fund, Cambrian Fund, a long-only vehicle that invests in a concentrated portfolio of publicly traded U.S. companies, has a compound annual growth rate of 24.3 percent since its October 1992 inception, more than double the 10.1 percent annualized return of the Standard & Poor’s 500 index during the same period. AJR International (BVI), a long-short U.S. equity fund that is ﬁve months younger than Cambrian, has a 17.3 percent compound annual gain since inception, compared with 9.9 percent for the S&P. In 2004, Roepers began exporting his strategy outside the U.S. with the launch of Rodinia, a long-short equity fund that invests primarily in Europe and Japan. Rodinia has achieved respectable compound annual growth of 11 percent in its relatively brief existence. More recently, Roepers launched Cambrian Europe and Cambrian Asia, long-only funds with a concentrated investment approach modeled after that of the highly successful Cambrian original. Both new Cambrian funds are down since inception but ahead of their benchmarks. Today, Atlantic Investment’s ﬁve hedge funds manage

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

Institutional Investor's Alpha Magazine - July/August 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Mr. Big Goes Small The Good Guys: Adopt This School! Interview: Man's Great Hope Cover Story: The Gentleman Activist Strategies: The New Bankers Profile: Staying Alive Research Center: The Best of the East The Asian Sensations Alpha Bytes: Into the Light Unhedged: Commentary: Speculating on Washington

Institutional Investor's Alpha Magazine - July/August 2008

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