Unstructured Finance

Slaying Goliath to save the Dragon

In the blue corner – Emirates National Oil Company (ENOC), which recently hired proxy solicitation firm Georgeson to get out the shareholder vote in favour of its $1.9 billion bid to buy out the 48 percent of Dragon Oil it doesn’t already own. (Georgeson say they are the oldest and best shareholder consultancy in the business, and helped engineer a record turnout for the HBOS AGM that approved Lloyds’s takeover of the bank.)

In the red corner – retail investors keen to “Save Dragon Oil”. Armed with a website and a 3,000-page printout detailing of the Turkmenistan-focused oil explorer’s investors…

Embracing the activist

Activist investors have traditionally been kept at arm’s length by the mainstream fund houses. Fund managers at the major players haven’t felt able to align themselves with those agitating for change for fear their cosy chats with company chairmen might be compromised.

There are clear signs though that the mood has shifted.

Cuddle for a tigerNot only are institutions getting rapped over the knuckles for failing to apply active ownership principles, but the credit crisis has purged short-termist activists from the market, helping to soften the sector’s association with financial engineering and slash-n-burn tactics.

Of course, mainstream houses have always afforded themselves some measure of collaboration; they just did it well away from the public gaze and in the UK were careful not to fall foul of so-called ‘acting in concert’ rules which limited the conversations shareholders could have with activists. The activist funds, after all, effectively create their own insider information while planning a campaign.

Has the moment for greater UK hedge fund regulation passed?

Tuesday’s grilling of UK hedge fund executives is likely to create plenty of noise but produce little in the way of new rules.

While media-shy TCI founder Chris Hohn and others will face tough questions from the Treasury Select Committee on financial stability, short-selling and other issues, it nevertheless seems that the pro-legislation lobby’s position may be weaker than it has been in recent years.

For one thing, many hedge funds simply do not have the financial clout — and therefore carry the associated risks seen by some politicians — that they once did.

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