Activist investor Jeff Ubben has left ValueAct Capital, the $16bn hedge fund he founded, to launch a new environmental and social impact investment company.
Mr Ubben’s departure from ValueAct comes after a years-long transfer of power. He handed off the chief investment officer job in 2017 and the chief executive role earlier this year to his handpicked successor, Mason Morfit.
“ValueAct needs to not be ‘Jeff Ubben’s ValueAct’ any more,” Mr Ubben told the Financial Times. “I haven’t put a stock in the main fund in three years . . . That’s a problem for ValueAct, since they should be able to move on from me.”
Mr Ubben will be joined at his new hedge fund — to be called Inclusive Capital Partners — by Lynn Forester de Rothschild, chief executive of the non-profit group Coalition for Inclusive Capitalism, and two former ValueAct colleagues.
He will continue managing ValueAct’s own $1bn impact fund while his new business gets off the ground. Existing investors in that fund will have the option to transfer their money over to the new venture.
Environmental and social impact is a logical next step for activist hedge funds, said Mr Ubben, who is famous for a friendlier approach to activism which avoids public battles with target companies in most cases.
He is looking to emulate the approach he used while running ValueAct’s flagship, where he managed between $10bn and $20bn and invested in a dozen or so companies at any given time, pushing for changes in strategy and personnel at the target companies.
“Companies, as governed today, with investors asking for more current returns and more buybacks and so forth, aren’t working for society or nature,” he said. “But I have to prove that there’s a return [in long-term impact], because otherwise . . . you’re not really changing anything.”
Activists can still “bully little companies to sell to private equity,” he said, but doing so will only provide modest profits.
“Finance is, like, done. Everybody’s bought everybody else with low-cost debt. Everybody’s maximised their margin. They’ve bought all their shares back . . . There’s nothing there. Every industry has about three players. Elizabeth Warren is right.”
Moral Money is our new weekly newsletter covering sustainable business, finance and investing. Sign up here for breaking news and insightful analysis on this bubbling revolution.
Having an impact fund and a traditional fund under the same roof at ValueAct was “confusing” for investors, Mr Ubben said. Those who opted for the impact vehicle worried they were leaving returns on the table, and those who opted for the flagship fund worried that about being portrayed as environmentally or socially “unconscious”, he said.
“I don’t think these two strategies peacefully coexist,” said Mr Ubben.
Pushing companies to tackle environmental and social issues, on the other hand, can create big returns, he said. “When you’re talking about addressing climate change with a business solution, that is the biggest problem in the world. That’s like a 10-times-your-money deal.”