By Cara Lombardo and Lauren Thomas
Nelson Peltz's proxy fight at Disney had the potential to help turn around his hedge fund after a tumultuous stretch.
Instead, the activist investor's unsuccessful quest for two seats on the media giant's board could make a comeback even harder.
Trian Partners has been grappling with lackluster returns, an investor exodus and the acrimonious departure of one of its founders. The firm's money under management ended last year at its lowest point since 2012, a previously unreported recent filing shows.
A Disney victory would have been a welcome win, but many of the big investors whose support Peltz needed sided with Disney Chief Executive Bob Iger instead. Trian had made roughly $300 million on its Disney investment when shareholders rejected its bid for board seats earlier this month. But that is in line with the market's rise over the same period, a point that doesn't go unnoticed by hedge-fund investors who pay hefty fees for outperformance.
All eyes are now on whether Trian will be able to make money on its biggest bet -- on Dove-soap maker Unilever -- and whether Peltz's days as a fearsome activist are over.
Taking on another proxy fight could be harder after the 81-year-old failed to win crucial support from the big index funds, BlackRock, State Street and Vanguard, some of which had previously backed him.
He turned off some of their top decision makers while campaigning, people familiar with the matter said. Peltz raised eyebrows with an interview with the Financial Times days before voting ended in which he questioned why "woke" Disney made movies such as "The Marvels" and "Black Panther" with primarily female and Black casts, respectively.
Shrinking assets
Trian's discretionary assets under management -- those they have full control over -- had been increasing steadily for years, reaching a peak of $12.5 billion in 2015. But they have declined in six of the past eight years, including each of the past four, hurt by soured bets such as a one on General Electric.
As of the end of last year, the firm managed $6.1 billion, a late-March filing with the Securities and Exchange Commission showed. (That excludes nearly $3 billion of nondiscretionary assets, primarily Disney shares owned by Ike Perlmutter, Peltz's friend who entrusted his voting rights to Trian for the proxy fight.) Assets have since risen to about $7 billion.
The firm says it had more money come in than leave in the past two years.
Investors including California State Teachers' Retirement System and the New York State Common Retirement Fund have been pulling out money, The Wall Street Journal reported last month. The full extent of redemption requests isn't reflected in the latest number, people familiar with the matter said, given that money is typically returned over several quarters.
Trian typically uses investment vehicles focused on a specific stock or sector for its biggest bets.
While such vehicles offer investors lower fees than a typical hedge fund charges -- often no management fee and around 10% of profits -- they also lock up their money for several years.
Some haven't lived up to Trian's ambitions. In 2020, one such vehicle took simultaneous stakes in Janus Henderson and Invesco and unsuccessfully tried to get the asset managers to merge.
All eyes on Unilever
The last time Trian raised money from investors for a major co-investment vehicle was in 2022, when it made a big bet on Unilever, the London-based maker of household names such as Hellmann's mayonnaise. Its $1.5 billion-plus stake is the firm's largest position, dwarfing Trian's own stake in Disney and consuming about 25% of its capital.
Unilever had been underperforming rivals including Procter & Gamble, which Peltz had helped streamline after he got a seat on its board in a previous proxy fight. Unilever's shareholders were in open revolt after then-CEO Alan Jope considered a $68 billion purchase of GlaxoSmithKline's consumer-health business that he ultimately backed away from.
Peltz joined Unilever's board a few months after Trian bought its shares. Investors hoped Peltz would work his magic like he had at P&G, whose stock rose more than 50% during his board tenure.
While pitching its own investors, Trian said it was targeting an annual rate of return of around 17% over four years, people familiar with the matter said.
The stock was trading around 37 pounds in London -- equivalent to about $46 currently -- when Trian arrived. That is roughly where it is now.
Peltz and Trian could yet achieve the success they had envisioned. Jope left last year, and Hein Schumacher, the head of a dairy cooperative who'd sat on Unilever's board, took over. Last month, he detailed a strategic plan that is expected to eliminate some 7,500 jobs and save about $870 million over the next three years.
A centerpiece of the plan is spinning off or selling Unilever's ice-cream business, which in addition to Ben & Jerry's includes Breyers, Talenti and Klondike. The unit had revenue of $8.6 billion last year but was the company's slowest-growing. Unilever shares rose 3% the day the company shared the news.
Trian 2.0
Trian has been working to steady itself after Ed Garden, one of its co-founders and Peltz's son-in-law, left last year. Many had expected Garden to eventually take over. Instead, he is no longer speaking to Peltz after a power struggle within the firm.
At the time, Trian elevated Matt Peltz, Nelson's son, and another partner, Josh Frank, to the roles of co-chief investment officers.
"Since the promotion of Trian's two new co-CIOs and the new head of research, performance has improved and performance of recent positions has been particularly strong," a spokesperson said.
Still, some on Wall Street wonder if Peltz will take on any more proxy fights.
Others say he could lay low for a bit, taking a page out of Bill Ackman's comeback playbook, and return as fierce as ever. Carl Icahn, another activist, fell prey to a short-seller attack last year that shaved billions off the value of his firm. After spending much of the past year doing damage control, he recently struck a deal with JetBlue Airways for seats on the airline's board.
Peltz has hinted that he has a new target in mind, saying on CNBC recently that he needed to finish buying his shares before revealing the company's name. In the same appearance, he fawned over Elon Musk. The Tesla chief has become a close friend and gave Peltz an 11th-hour endorsement on his social-media platform, X, ahead of the Disney vote.
"I think the world of him," Peltz said of Musk. Some read it as a sign that the two could join forces on an investment some day.
--Peter Rudegeair contributed to this article.
Write to Cara Lombardo at cara.lombardo@wsj.com and Lauren Thomas at lauren.thomas@wsj.com
(END) Dow Jones Newswires
April 17, 2024 05:30 ET (09:30 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
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