Trian Partners, the shareholder activist fund run by Nelson Peltz, has staged a comeback in the first seven months of the year after a punishing end to 2018 left the fund with its worst annual loss in a decade.
The $9bn hedge fund posted gains of about 18 per cent through to the end of July, according to a person familiar with the firm, as global equity markets bounced on expectations of looser monetary policy.
The firm’s largest holdings were in the American conglomerate Procter & Gamble and food company Sysco. It is also among one of the largest hedge fund shareholders in General Electric, the beleaguered industrial conglomerate.
P&G shares, the hedge fund’s biggest position, have risen 32 per cent in the first seven months of the year while Sysco’s stock price is up 10.5 per cent.
With volatility creeping back in, defensive stocks have gained favour on Wall Street as trade tensions between the US and China have escalated.
P&G has staged a recovery since Trian targeted the consumer goods group two years ago alleging “chronic underperformance”. The company, which has implemented several of Trian’s demands, including a simplified corporate structure, grew sales at the fastest pace in 13 years in its recent fiscal fourth quarter.
Mr Peltz received a warm reception after rejoining Legg Mason’s board earlier this year, with the asset manager’s stock price up 13 per cent since his election. Trian had a 4.5 per cent stake in the company’s shares as of May.
Trian, which takes stakes in companies to lobby for corporate change, has had mixed results over the past five years despite the longest bull market in history. It was up 3.7 per cent in 2017 and 10.9 per cent in 2016, according to HSBC data, but in a bruising 2018, it ended the year down more than 6 per cent.
Trian declined to comment.
The S&P 500 index of US equities was up 16.4 per cent by the end of July, meaning the equity market has put a powerful tailwind behind many funds.
Hedge funds as a whole are having one of their best starts to the year. Fund data provider HFR’s performance index across all strategies is up 8 per cent after ending 2018 down 4.8 per cent, while its activist index is up 9.4 per cent, after a decline of 10.4 per cent last year.
Pershing Square Holdings, Bill Ackman’s publicly traded fund, is up 49.4 per cent for the year to the end of July, making it the best-performing activist fund this year. It is also the fund’s best start to a year ever.
The fund’s rally comes after several tough years for the investor, during which he faced off against Carl Icahn on his big bet against the wellness company Herbalife and saw performance at the fund decline four years in a row.
Mr Ackman recently closed out two of his largest and most active positions, the human resources outsourcer Automatic Data Processing and United Technologies. The investment in ADP was up 51 per cent over the two years the fund held the position, for a return of $1.2bn, while the UTC stake was mostly flat.
Third Point, Daniel Loeb’s $15bn hedge fund that has about half its assets invested in activist or actively managed equity strategies, is up 15.7 per cent through to the end of July. The firm had one of its worst years ever in 2018 when it declined 11.3 per cent, hurt by a risk arbitrage stake in NXP Semiconductors and the dramatic December sell-off.