All this raises an inevitable question: how has the average activist fund actually performed? It’s fair to say that the track record is mixed. While there’s no single universal metric measuring the strategy’s success, an examination of several activist hedge fund indexes shows that the average fund’s return underperforms that of the US S&P 500 stock market index. Once you factor in fees, a cheap S&P 500 index tracker looks even more attractive.

Unfortunately, there’s no easy way to avoid those hefty fund fees and implement your own activist investing approach. In order to get a company’s attention, you need to first purchase a significant shareholding – and that obviously requires a huge amount of money.

You can potentially profit by buying some shares of companies that are subject to activist interest as soon as news breaks of, say, Icahn’s involvement. There are two potential pitfalls, however. First, by the time you come to trade the news, the company’s share price may have already risen by as much (or nearly as much) as it’s going to. Rumors of an intervention may have been circulating for a while, and the activist investor itself may have pushed up prices as it assembled its stake. Second, the medium-term returns from following activist investors in this way are inconclusive. The chart below shows the relative returns (compared to the S&P 500) of the best- and worst-performing quartiles of activist campaigns between 2007 and 2017.

Activist investing has a mixed track record

Of course, you can also invest directly in and with Icahn via his publicly listed investment conglomerate, Icahn Enterprises (ticker: IEP). Over the years, IEP has become Icahn’s principal means of making activist moves, and he retains ownership of around 90% of its own shares. As ever, make sure you do your research before deciding whether or not you think IEP is a good investment.

Regardless of whether or not you’re interested in investing in activist funds, however, the good news is that there are plenty of lessons to be drawn from the successes – and failures – of major activists’ careers. ✍️