Hedge fund activism: Anson Funds CIO Moez Kassam on unlocking shareholder value

As shareholder engagement becomes increasingly prevalent in public companies, activist hedge funds are playing a central role in reshaping corporate governance and influencing management decisions.

An activist hedge fund owns a stake in a public company and engages in a campaign among shareholders and board members to persuade them to consider and adopt valuation strategies suggested by the fund’s managers.

These strategies can range from a change in management, to removing some underperforming company assets, to adopting peer-proven practices that will generate long-term gains for the company.

For fund managers, this process is exciting and entrepreneurial, and it requires a level of judgment, courage and determination that takes many years to refine and perfect.

“To be successful as an activist fund, you have to love the process of identifying and finding hidden opportunities that the market has missed,” says Moez Kassam, chief investment officer of Toronto-based Anson Funds.

Kassam’s firm has received significant attention for its success, being recognized as a top-performing investment manager by Barron’s, Bloomberg and HedgeWeek. Since 2007, Kassam has grown the fund to manage more than $2.0 billion in assets.

Anson Funds’ activism strategy is led by portfolio manager Sagar Gupta, who uses a concentrated approach to his investments in small- and mid-cap stocks, primarily in the United States and Canada. This focused approach has delivered results by engaging directly with boards and management to drive shareholder value.

Anson Funds focuses on companies with significant valuation potential. According to Sagar Gupta, the key to the company’s success lies in identifying opportunities where its expertise can have the greatest impact. “We look for companies where we can make a difference, where our commitment can help generate value not only for Anson, but for all shareholders,” says Gupta.

This approach contrasts with the broader, more diversified investment strategies of many other hedge funds. Anson Funds’ activism strategy maintains a smaller, concentrated portfolio, allowing for a more hands-on approach with each company they invest in.

“By focusing on a number of investments, we can dedicate the time and resources needed to actively work with management teams and boards to implement change,” adds Gupta.

The cornerstone of this type of strategy is direct engagement with the boards and management of portfolio companies. This collaboration often takes place behind the scenes, with the aim of fostering positive and constructive dialogue.

Kassam believes in the power of networking and leading thoughtful, cooperative conversations with leadership teams to guide strategy. This way, funds can get a sense of the broader picture, identify key missteps, and find ways to unlock value through operational improvements.

Activist hedge funds must be willing to make their ideas public so that a company’s shareholders and board members will support them. They must be prepared to exercise their shareholder rights in a public forum and hold management to account.

While Anson Funds’ preference is to work discreetly behind the scenes, they have shown a willingness to go public with their campaigns when management teams are unresponsive. The company has demonstrated its commitment to exercising its shareholder rights in the public eye when necessary.

“Making information public is of course not the first option, but it is a necessary tool when private conversations do not lead to the right results,” Kassam explains. “This is about ensuring transparency and accountability for the benefit of all stakeholders. »

As hedge fund activism continues to evolve, behind-the-scenes engagement with corporate boards to exercise public shareholder rights will become increasingly prevalent. Anson Funds’ model is designed to be flexible and adaptive, focused on shareholder returns and strong corporate governance. Its success will likely lead to this model being replicated by activist funds aiming for similar results.