More and more Wall Streeters want to be like Carl Icahn — and Dan Loeb, Bill Ackman and Paul Singer for that matter.
The number of new activist hedge funds exploded last year to 28, more than double the 12 that got off the ground in 2012, according to a new report by Preqin, a hedge fund data service.
Activist funds as a group have outperformed their peers for the past five years, Preqin said, with an annualized 12.7 percent return over that time period compared with an 11.7 percent return for hedge funds as a whole.
Of course, neither type of fund has outperformed the broader market for five years and new launches pulled in only $21 billion in 2013 — the lowest amount since 2004, data provider Absolute Return said.
No wonder wannabe hedgies are hoping to channel winning activists like Loeb, whose $14.5 billion Third Point gained 25 percent in 2013, or Icahn, who was up 31 percent.
The S&P 500 rose 29.6 percent last year.
Last year’s biggest new launch is off to the races. Sachem Head, started by Ackman acolyte Scott Ferguson, raised $1 billion by year’s end and was up 6.6 percent this year through May, according to an investor, outpacing the wider markets.
This year, things are looking a little dicier for a number of players.
Loeb is only up 4 percent, despite winning his big Sotheby’s battle. Singer’s Elliott Management, which Preqin called the largest activist investor with $23 billion, gained 2.5 percent through May, according to an investor. Activism is only a small part of Elliott’s portfolio, he noted.
Ackman’s $14 billion Pershing Square is the big outlier this year — with a 22.5 percent gain — but he’s done it by re-writing the activist playbook and hooking up with a serial acquirer to launch a hostile takeover of Allergan that so far has generated more criticism than praise.
Still, investors say they don’t see an activist bubble quite yet.
“Activists are influencing companies, and it seems to be effective,” said a hedge fund investor who may put money into a new activist fund launching in July called Anandar Capital, in part because it promises to hedge its bets more than the other activists.