Corporate America’s biggest shareholders have traditionally been content with sharing their views on a company’s strategy privately with management.
But now some mutual funds are beginning to rethink their stance, amid pressure from investors for them to justify the fees they charge and a push to boost the performance of their holdings.
Wellington Management Company LLP’s decision last month to speak out against drug maker Bristol-Myers Squibb Co’s proposed $74 billion acquisition of Celgene Corp, calling what would be the largest-ever pharmaceutical takeover too risky and expensive, sent ripples across the investment world.
This is because these tactics have typically been the purview of activist hedge funds like Starboard Value LP and Elliott Management Corp, not a large institutional money manager like Wellington, with $1 trillion in assets under management.
But in the case of Bristol-Myers, Starboard spoke out publicly against the deal one day after Wellington unveiled its stance publicly.
Wellington’s vocal opposition to the deal is the culmination of some mutual funds gradually feeling more emboldened to publicly challenge a company’s strategy, asset management executives and corporate governance experts say.
“There has been a growing chorus among investors who want these firms to speak up. With Wellington speaking up, it is going to put pressure on the others to do the same,” said Lawrence Glazer, managing partner at Mayflower Advisors, which invests with Wellington funds.
In January, chemicals company Ashland Global Holdings Inc agreed to changes to its board after pressure from asset manager Neuberger Berman Group LLC, which has about $300 billion in assets under management.
T. Rowe Price Group Inc, which manages close to $1 trillion in assets, has opposed several acquisitions, including Michael Dell’s offer to take his eponymous computer maker private, because it felt the proposed deal undervalued the company.