Shareholder activism is gathering adherents among hedge funds, attracting managers both seasoned with the strategy and otherwise. Somewhere in the middle of the experience spectrum is John Mutch.
Mutch is president and CEO of Peregrine Systems, the San Diego-based software company in the process of being acquired by
(HPQ - Get Report)
. He's preparing to launch MV Advisors I, an activist hedge fund, in January. Mutch personifies a new breed of manager hoping to turn his firsthand knowledge of turnarounds and corporate governance into big profits in investing.
: Tell us about your background.
: Since 1997, with my appointment as CEO of HNC Software, I've been executing a series of restructuring, spinout and merger transactions that have delivered over $4 billion in incremental market-capitalized value to investors. I joined the board of Peregrine Systems in March '03 and I am still the CEO. A month ago, we announced the sale of our company to Hewlett-Packard. We'll launch MV Advisors I immediately upon the closing of the Peregrine transaction, sometimes after January.
: How can you be a hedge fund activist without a hedge fund experience?
: My experience in working with companies' boards and running companies gives me the background to identify operational improvements of companies and approach management in ways in which they will trust me. I can tell a CEO: "I sat on your seat. I can understand what your issues are." My experience also taught me that well-governed companies with a high level of directors' professionalism achieve and exceed performance of poorly-governed companies.
: How do you define well-governed companies?
: It's when you have an internal audit reporting directly to the chairman of the audit committee. It's when you have an independent corporate compliance officer who reports to the chairman of the compliance committee. Board members don't sit on the boards of suppliers. The CEO and the chairman are two different people. And people are held accountable through the compensation plan. On the other hand, a poorly-governed company is the all-boys club. All the guys went to school together. You slap my back, I'll slap yours.
: What makes you unique?
: What we are doing is launching a classic shareholder strategy using a hedge fund. We'll be the only hedge fund that I know of that will be using shareholder activism focused on one sector, in our case, the technology industry. We want to raise $500 million invested in 10 different companies with an averge of $50 million invested in each.