DealLawyers.com Blog

In the unlikely event that you live in a cave and didn’t already know this, tomorrow is Election Day in the United States. As you consider your own voting decision, I thought it was worth noting that, according to this new Sidley memo, the people calling the shots at activist hedge funds have already made theirs – and they’re backing Donald Trump. The memo recites the usual litany of reasons why investors typically favor the GOP’s presidential candidate, but goes on to suggest that when it comes to Trump, activist investors may come for the deregulation, but they stay for the chaos:

At the same time, another Trump administration could involve the implementation of policies resulting in economic dislocation. Trump has promised to put through changes, including a universal 20% tariff, which many economists fear could negatively impact the global and domestic economy. These policies tend to make Wall Street nervous. However, it seems that many activist investors are either dismissing — or accepting — the risk of a Trump administration’s triggering widespread disruption. As every shareholder activist knows, companies struggling amidst volatility are prime targets for activism because their share prices are artificially low and present a clear case for change.

Everyone has their own reasons for backing a particular candidate, and I guess I shouldn’t be surprised that the chaos trade is one reason that many activists have chosen to back Trump. It’s just that I never realized how many hedge fund principals thought that Yeats’s “The Second Coming” should be housed on the same bookshelf as Benjamin Graham’s “The Intelligent Investor.”

– John Jenkins