Under the leadership of activist investor Nelson Peltz, Trian Fund Management encountered difficulties in 2018.
The fund’s poor performance in comparison to its fellow activist hedge funds was largely caused by a $3 billion wager on Walt Disney.
Trian Fund’s Disney Dilemma
Detailed financial information shared by a Trian investor sheds light on the high stakes involved as Trian endeavors to reshape Disney’s board in one of this year’s most prominent proxy contests.
According to the disclosed details, Trian’s fund reported a 10% return last year, falling short of the 20% average return achieved by activist hedge funds, as per data compiled by Hedge Fund Research.
The substantial underperformance was notably linked to Trian’s sizable position in Disney, constituting approximately 40% of its total portfolio at the end of the third quarter. While Disney’s shares saw a modest 4% increase in 2023, the S&P 500 index recorded a robust 24% rise.
Trian’s spokesperson has chosen not to comment on these revelations, highlighting the sensitivity surrounding the fund’s recent performance.
Trian initially acquired its Disney stake at the end of 2022 and subsequently threatened the company with a board challenge in January 2023. The criticisms levied against Disney included losses in its streaming business, poor corporate governance, and concerns about its succession plan.
CEO Nelson Peltz decided to withdraw the board challenge in February 2023 after Disney announced a comprehensive restructuring program, involving cost cuts and a significant reduction in workforce through 7,000 layoffs. Peltz expressed contentment, stating, “Now Disney plans to do everything we wanted them to do.”
However, as Disney’s shares struggled for the majority of 2023, Trian adjusted its stance. The fund increased its ownership in Disney fivefold, reaching approximately 2% of the company, and accused CEO Bob Iger and the board of failing to deliver on the promised turnaround.
In a recent development, Trian announced its intention to nominate Peltz and former Disney CFO Jay Rasulo to Disney’s board.
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Disney Warns Shareholders Against Trian’s Influence and Board Disruption
Disney has actively encouraged its shareholders to oppose Trian’s move, asserting that the activist fund’s candidates could disrupt the current board dynamics. A crucial shareholder vote on these nominations is anticipated in the spring unless a compromise is reached.
Comparatively, another activist hedge fund, ValueAct Capital, which has been supportive of Disney’s board, reported a 39% return last year.
ValueAct acquired its Disney shares later in 2023, well after Trian had established its stake, when the stock was closer to recent lows.
While Trian faced a setback in its Disney investment, it experienced successes elsewhere in its portfolio. Double-digit gains in plumbing parts distributor Ferguson Plc and asset manager Janus Henderson Group contributed positively to Trian’s overall performance.
A year ago, Trian claimed that companies in which it had invested outperformed the S&P 500 in total returns by an average of 9% annually during Peltz’s board service.
However, the fund has not provided a more recent figure, leaving its overall track record in the spotlight as it navigates the complexities of the Disney proxy contest.
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