Question for the day: Why aren’t there any activist mutual funds? (Or are there?) One big difference between equity hedge funds and long-only mutual funds is that the hedge funds often seek out underperforming companies, and then agitate for some kind of a shake-up. Today, for instance, we learn that the UK’s Toscafund has amassed a significant stake in ABN Amro, and would love to see the Dutch bank taken over by a more efficient rival.
Interestingly, Toscafund in this respect differs from the other big hedge fund with an ABN stake, TCI — which is looking more for a breakup than an acquisition by a competitor.
Either way, both funds are taking large long-only stakes — something no mutual fund is enjoined from doing. As hedge funds and hedge-fund replicators become increasingly popular among increasing numbers of investors, many of whom can’t invest in hedge funds or fund-of-funds directly, one might expect to see more mutual funds charging high fees for their own activism.
The only problem: Why would a fund manager go down that road, when setting up a hedge fund would be so more lucrative? If such managers do exist, I suspect they might emerge from the socially responsible investing space.