A recent Wall Street Journal article pointed out that “Mutual Funds take the role of Activists.”
In the past, Mutual Funds were adverse to become involved in Corporate disputes (although recently, some have quietly supported activists). Their view – we can always liquidate our investment.
Now it appears they are willing to become more actively involved. Some quietly pushing for changes, others becoming more confrontational with management.
As quoted, Neuberger Berman is willing to scrap directly with CEO’s and board members of small-cap companies in which they are invested. For example, they went public with their demands 60 times in 2018.
Companies are being asked to change the make-up of their boards – return more capital to investors.
Mutual funds are being affected by funds flowing into low-cost index funds, which is having its impact.
Hence, corporate executives have to be mindful of this emerging trend by Mutual Funds and spend more time dialoguing with their major investors.
Ref: The Wall Street Journal