4/15/2021

Macellum Capital's Jonathan Duskin Talks Activism

WWD.com (04/15/21) Moin, David

Macellum Capital Management was one of a group of activist investors that successfully pressured Kohl's (KSS) to remake its board, and CEO Jonathan Duskin says, "we almost don't think of ourselves as activists. We identify companies that stubbed their toe and could use some help." According to Duskin, Macellum "first works more constructively with the board," and "our brand of activism is more like private equity in the public markets." He said his firm looks for companies with "self-inflicted problems we think we can fix and where we think we can put people on the board to help fix it." Duskin adds that the question becomes, "Are shareholders going to join us in this endeavor or say go play in another sandbox?" Macellum invests in undervalued companies with potentially higher values through revisions to corporate strategy or governance, improvements in operations, and capital apportionment. "I can't believe more companies don't invite activists to speak to their boards, but once the campaign starts, the defense—the bankers and counsel—everyone, they are generally open to listen. They want to hear your perspective," Duskin explains. He says many board members fight to hold onto their seats out of a sense of entitlement, but "the easiest thing a board can do is refresh themselves. Bed Bath & Beyond [BBBY] did it. Kohl's just did it. They can adopt a lot of the initiatives you are focused on. Cost-cutting is a freebie. We [Macellum] are not short-termers. I don't try to nominate myself to go on boards." Meanwhile, Adam Rifkin at Guggenheim Securities recommends that boards review strategic and financial options every six to 12 months. He echoes Duskin's observation that "in many situations, boards take a long-term approach to everything they are doing and many activists take a short-term perspective." Rifkin also notes many retail boards follow "insular behavior continuing to do things the way they have always done things and failing to transition their business, from a strategic standpoint or reallocating assets or restructuring their balance sheets. Generally, retailers and consumer companies that continue to reinvent themselves, moving their businesses forward, are the ones that don't run into problems with activists."

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4/15/2021

Hedge Fund Adviser Sees 'Potential' for Exposing ESG Fakes

Bloomberg Green (04/15/21) Liman, Love

NorthPeak Advisory CEO Petra Dismorr expects hedge fund managers will play a crucial role in gauging companies failing in their duty to meet environmental, social, and governance (ESG) promises. "It is hugely underestimated, the active role that hedge fund managers in particular can take," she says. According to her, the "day-to-day interaction" that portfolio managers and analysts working for hedge funds have with the companies in which they invest offers "great potential" in terms of weeding out frauds. Investors are increasingly concerned with knowing whether an investment is as sustainable as it claims to be. In the Nordic region, cash-rich shareholders are increasingly worried at the prospect of purchasing fraudulent ESG products, and Dismorr says lessons learned in that region will guide others. Meanwhile, Goldman Sachs Group Inc. (GS) officials anticipate that growing demand for sustainable assets will induce a greater need for active management, which means more oversight of portfolios. The firm is adding 40% more people to its Nordic staff to service the region's asset management sector. The speed in which financial products are being labeled as ESG is often overtaking investors' ability to perform due diligence before committing funds. The U.S. Securities and Exchange Commission recently warned that some money managers are promoting non-sustainable funds as sustainable, potentially exposing them to legal risks. Regulators in Europe are attempting to enforce a more unified taxonomy, but there remains little clarity among investors about assessing securities' sustainability. Concurrently, acceptance is gaining that investors who ignore the value of ESG will lose money. "The big challenge is the fact that there are a lot of so-called ESG experts coming to market, a lot of miss-selling of products that aren't ESG," says Dismorr. She adds that the hedge-fund industry has an advantage when it comes to pressuring corporations. Dismorr mentions that many asset managers "are choosing to create their own bespoke ESG data monitoring filters. A lot of the quant houses have been very much at the forefront of that."

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