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Are Mutul Fund Companies Becoming Activist Investors?
By JLP | October 2, 2007
There was a very interesting article, Mutual Funds Get Mad ($), in the Wall Street Journal today about how mutual funds are becoming activist investors when they see companies doing things that hurt their (the mutual fund’s) returns. The article profiled T. Rowe Price’s effort to stop a buyout of Laureate Education led by Laureate’s CEO and a private equity firm.
According to the article, the T. Rowe Price’s resistance to this particular deal was that the buyout offer was for 80% less than the company was worth.
One of the issues that the article brings to light that I hadn’t really thought about is that more and more deals are being led by company insiders and private equity firms working together. Since their goal is to get the firm as cheaply as possible, it puts the company insider at odds with shareholders. It’s a huge conflict of interest.
Anyway, mutual fund companies are beginning to take notice and are taking steps to stop deals that aren’t good for them. I think this is great!
Topics: Investing, Mutual Funds | No Comments »