The Dark Side of Hedge Fund Activism: Evidence from Employee Pension Plans

Activist Hedge Funds and Takeovers: Their Effects on Employment and Performance

“…A key issue is whether AHFs put longer-term performance of the targeted firms at risk by focusing on short-term returns, possibly by transferring wealth from other stakeholders (Agrawal and Lim, 2021;Coffee and Palia, 2016). The argument here is that short-term abnormal returns are generated by measures which destroy valuable human capital in the company, thereby damaging productivity and profitability in the longer term.…”

“…As in takeovers initiated by other types of investors (see Amess, Girma and Wright, 2014;Conyon et al, 2002), restructuring initiated by AHFs can involve employment reductions (Chen, Meyer-Doyle and Shi, 2021;DesJardine and Durand, 2020), wage cuts (Brav, Jiang and Kim, 2015) and divestitures (Gantchev, Sevilir and Shivdasani, 2020), all aimed at securing immediate gains in company value and operating performance. Some argue that these initiatives breach long-term implicit contracts with employees (Agrawal and Lim, 2021) and facilitate wealth transfer from employees to shareholders (Coffee and Palia, 2016). However, whether restructuring after takeovers with AHF involvement leads to performance improvements is uncertain, with mixed evidence on post-takeover performance (Gantchev, Sevilir and Shivdasani, 2020).…”

The Political Economy of Rental Housing in Spain: The Dialectics of Exploitation(s) and Regulations

“…Where do these hedge funds' 'pools of liquidity' come from? Mainly from workers' savings, which are invested into hedge funds via pension funds (McIntosh 2013, Agrawal and Lim 2020, The PEW Charitable Trust 2017. Note here how banks are benefiting from exploitation taking place in the production process: The larger the amount of wages placed into pension funds and subsequently placed into hedge funds, the more power hedge funds have to invest in REITs, and the more opportunities banks have to be involved in housing markets via issuing mortgages or purchasing minor shares in REITs (Cinco Días 2017).…”

“…Real estate has been a natural focus. This quantitative-easing rooted need to find profitable niches for pension funds has been the ultimate driver leading to an increase in secondary exploitation through rental housingthe more exploited tenants are, the more pension funds get into alternative investments, such as rental housing, as these are considered highly profitable (Brav et al 2009, Agrawal andLim 2018). However, such investments in rental housing does not guarantee higher yields for pension funds in the long run.…”

“…What is more, hedge funds are increasingly accessing the managing boards of pension funds in order to better supervise pension fund investments into hedge funds; once in control of a pension fund board, hedge funds tend to maximise the share of income that ends up their own hands and minimise the share that actually goes to the hands of employees (Brav et al 2009, Agrawal and Lim 2017, The PEW Charitable Trusts 2017, Dizard 2019.…”