Lately, the term “activist investor” has become a prominent part of the public lexicon. It’s a useful way of categorizing a particular type of person who, beyond investing for retirement purposes, invests with a strategy intent on changing the world. Activist investors are motivated by all sorts of desires for the future, and anyone who chooses to invest can take an activist approach to their holdings. Here, we look at the term a little closer to try and pin down how an activist investor does what he or she does.
What is the Activist Investor?
The goal of an activist investor is someone, or a group or company, that approaches investment with the intent to obtain seats on a company’s board. This is where true change is possible at the corporate level, and it involves buying a great deal of that company’s stock shares. Not easy for the average person.
This is why there are brokerage firms designed for activist investing. Remember, this isn’t about returns, it’s about purpose. You can expect returns on good investments, but you’ll also have to vet the firm you’re investing with to make sure they are pursuing an agenda you agree with.
Pros and Cons
Some argue that activist investing hurts American companies by introducing anti-business logic into the board. This may have some truth to it, as activist investors can take extreme stances on certain issues. That might result in board members at conflict, and arguments that can drag on and ultimately hurt the company’s bottom line. Others want to strengthen the company’s holdings in a sustainable and ethical manner.
But, introducing new people to the process often helps spur growth from innovation. Activist investing is only as good or as bad as the outcomes it achieves. Consider why you’re investing, what your intent is, and what your hopes are for the future before you begin pursuing activism in your investing.
Bio: Omar Amanat was born in Queens, New York, and got his start in the financial industry. Today, Omar Amanat is a philanthropist who raises money through film production.