By Katya Wachtel
NEW YORK, Oct 23 (Reuters) - Former Wall Street gaminganalyst Jason Ader tried his hand at activism this year, goingto battle with a U.S slot-maker International Game Technology in a successful campaign to win a board seat for hisfirm. Now he appears to be making a deeper commitment toactivist investing.
Ader has merged his Ader Investment Management with hedgefund Cumberland Associates to form a new activist firm calledOwl Spring Asset Management, the company is scheduled toannounce Wednesday.
Activist investors push for change at companies they believeare undervalued and can provide better shareholder returnsthrough a change in strategy or management.
Owl Spring is beginning operations with about $225 million.Roughly $30 million of the capital is from Ader and CumberlandCEO Andrew Wallach.
Cumberland, established in 1970, specialized in activistinvesting, though it typically avoided public battles with itstargets, instead speaking with management and boards far awayfrom the media glare.
"Cumberland has only once in my recollection taken a publicposition but we have done plenty of advocacy over the years,"said Wallach in an interview on Tuesday. "Now we will be doingthe same, but in a more public fashion."
Ader's eponymous firm this year waged a successful proxybattle to agitate for a boardroom shakeup at U.S. slot machinemaker International Game Technology. It was the first time theformer Bear Stearns gaming analyst embraced an activist-style ofinvesting.
At the same time as he was pushing for change at IGT, Aderwas seeking out activist managers as part of a hedge fundseeding business he launched in 2012, which he has since sold.In the process of looking for those managers, Ader discoveredCumberland.
Ader and Wallach are co-CEOs of the new company, which isbased in New York.
Owl Spring will focus on the debt and equity of small andmedium-cap companies in consumer, real estate, technology,media, telecommunications and natural resources sectors.
The hedge fund is already involved in dialogue with severalcompanies, Ader said, which operate in the leisure, restaurant,retail and energy industries.
The fund's launch comes as activism in the hedge fundindustry has come back into vogue, with a slew of new playerssuch as Marcato Capital Management and Engaged Capital rattlingcorporate cages, alongside veterans of the strategy such asWilliam Ackman and Carl Icahn.
There's been a "a dramatic increase in new activist fundlaunches over the past year or so," said Damien Park, whoseHedge Fund Solutions tracks activist funds. "In addition, we'veseen well-established activist funds add significant capital andsuccessfully launch new investment vehicles," he said.
Park pointed to William Ackman's Pershing Square, whichraised a special purpose fund to invest in Air Products and Barington Capital Group, which launched a similar vehicle toinvest in Darden Restaurants, the parent of the OliveGarden and Red Lobster chains.
Indeed with the U.S. economy in recovery mode, shareholdersare putting more pressure on underperforming companies -especially those with cash on the balance sheet that investorsthink can be put to better use.
"The environment is ripe for activism as we are nearly fiveyears into a recovery and management has no excuse not to beshareholder friendly and use excess capital to pay dividends orrepurchase equity, compared to post crisis when it wasunderstandable for management to horde cash," said MichaelWeinberg, a professor at Columbia University's business schooland chief investment officer of an investment advisor based inNew York.
- Private Equity & Hedge Funds
- International Game Technology