Being targeted by billionaire investor Nelson Peltz is a chief executive’s nightmare. Turning the tables invites schadenfreude. After a hard-fought activist campaign, his London-listed investment company announced on Friday it would wind itself up. Shares in Trian Investors 1 jumped 14 per cent on the news.
The trust put a brave face on the move, describing it as a “positive and sensible” way forward. Distributing its Unilever and Ferguson shares in-specie indeed makes sense, allowing investors to choose when and whether to cash in the stocks of the consumer goods and heating companies.
Trian Investors 1 presents itself as a long-term investor vanquished by the City’s short-termism. But rebel shareholders were right to object when it changed its objectives last summer from investing in a single company and paying back returns to being a permanent capital fund investing in multiple businesses.
Before Friday’s jump, the shares had risen 30 per cent since the 2018 launch, compared with a 3 per cent fall for the FTSE 100. These illiquid shares threatened to be a trap. They offered little appeal to new investors, given that they can buy the underlying shares directly. The discount to net asset value reached almost 40 per cent in January.
Discounts are a feature of UK investment companies. These expanded by nearly four times on average in the first half of the year to just under a tenth. But the discounts for UK vehicles of US hedge funds tend to be particularly wide. That of Pershing Square Holdings, Bill Ackman’s quoted vehicle, is almost a third. Activists waged a battle to close the discount at Dan Loeb’s Third Point Investors. It ended in a truce of sorts in February.
Such tussles reflect the City’s strict corporate codes, although it is worth noting that the UK lacks US-style restrictions on closed-end funds performance fees. The campaign against Trian Investors 1 following its rule change last summer was warranted. Its capitulation sends a useful message.
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