A focus on corporate restructuring instead of fundamentals is causing activists to stumble
The scandals of Corporate America have been a godsend for hedge fund activists, who shined a bright light on a slew of mismanaged companies and became the rock stars of the hedge fund world in the process. But due to missteps by activists in companies like Massey Energy and BKF Capital, their star is now in danger of dimming.
What is going on here? "Activists can have such a shortsighted view that they don't understand that there may be bigger forces at work outside of the event activists want transacted," says one activist manager who believes "there will be a backlash against activists if these stocks keep going down."
Such concerns follow a disastrous October for activist managers used to making soaring returns by rattling corporate managements. Warren Lichtenstein's Steel Partners, with a 9.5% stake in BKF,...