Nelson Peltz hedge fund dragged down by blue-chip bets
Trian Partners suffers losses on General Electric and Procter & Gamble this year
Trian Partners, the hedge fund run by veteran activist investor Nelson Peltz, has been dragged into the red this year by share price declines at two of America’s largest companies.
Trian ended the first half down almost 2 per cent, according to a person familiar with the result, with its stakes in General Electric and Procter & Gamble both down by a double-digit percentage.
Mr Peltz is telling investors to keep the faith, however, since Trian has board seats at both companies through which it is trying to push for improvements.
A jump in GE’s shares last week, in the wake of its announcement of a partial break-up plan, did little to reduce the sting of losses. Trian took a $2.5bn stake in the company in late 2015, when shares were trading at about $25, and said at the time that it envisioned they could be worth as much as $45 by the end of 2017.
GE ended last year below $18, and by the close of trading on Friday, they were down a further 22 per cent to $13.61.
Trian sold off about one-sixth of its position in late 2015 and early 2016 at about $30, but the share price collapse since then means GE now counts as one of Mr Peltz’s most disastrous investments. His stake is now worth just under $1bn.
Meanwhile, Procter & Gamble, the fund’s largest holding, is down 15 per cent this year in the face of margin and market share pressures across the consumer goods industry.
Another company in Trian’s seven-stock portfolio, the industrial group Pentair, is also down sharply this year — by 11 per cent at the end of June. Partially offsetting the losses, the fund’s second-largest holding, the food company Sysco, is up 12 per cent, and its stakes in Bank of New York Mellon and burger chain Wendy’s are also in positive territory.
GE has been unpicking the legacy of its former chief executive Jeff Immelt, who spent nearly two decades on an acquisition spree until a sharp decline in its operational performance accelerated his departure.
Last week, the company took a major step towards slimming down when it announced it would spin off two of its largest divisions — its healthcare division and its stake in Baker Hughes, the oil services company.
Trian said it was in favour of the company’s new approach. “Trian supports the strategic initiatives announced by GE and believes that these initiatives will create substantial value for shareholders,” she said.
Trian typically holds its activist stakes for many years, so insiders say they are confident of improving performance over the long run. After a long fight for a board seat, Mr Peltz finally became a P&G director in March, while Trian partner Ed Garden joined the GE board in October, shortly after John Flannery replaced Mr Immelt.
Trian’s near-2 per cent decline this year compares to a 1.7 per cent rise in the S&P 500 index of US stocks in the first half.
The GE share price performance has been one factor in Mr Peltz’s fall from the upper tier of best-performing activists. His fund, which manages about $12.5bn, was beaten by the average of its peers in 2017 for the first time in at least five years. According to HFR data, overall activist returns have also been positive this year, up 0.7 per cent to the end of May.
Mr Peltz is now looking to follow a wave of his peers to Europe in search of more opportunities for activist campaigns. According to a person familiar with his plans, Trian is planning to raise more than $1bn for a fund that will be listed in London later this year.