Week of Feb. 15: Activist Cloning

I was recently reading an interesting article about portfolio cloning. As many Investor Relations professionals know, buy-side investors are extremely important. Most mutual funds are buy-side investors, yet the fund I am mentioning is an exception. One mutual fund company has an interesting idea. This fund clones the collective intelligence of activist investors like Carl Icahn, Relational Investors and many others. They include in the mutual fund an equally weighted basket of the major holdings of these activist investors. This fund returned 40% over the past year compared to the S&P 500's return of 25%. Since 2000, the fund has outperformed the S&P 500 by 8%. I believe IR professionals should not pay any attention to these types of mutual funds. Why? Because the funds simply mimic activist investors and most likely have know interest in learning about your specific company. Yet, it is important that IR personnel handle activist investors properly, since these activists can trigger more investment from mutual funds who strive to mimic activists.