At the tiny ASX-listed fund manager GVF, Miles Staude and his wife Emma Davidson don’t shy away from bruising battles with the big beasts of Wall Street.
| You can tell that Australian fund manager Miles Staude was a schoolboy basketballer: he’s a proper beanpole, almost two metres tall. So if you were to castBut in the real world, that’s exactly who he is: as a financier, he’s developing a global reputation as an unlikely giant-killer.Domenico Pugliesetaken on two of the most intimidating titans of activist investing, and won.
It must have been an uncomfortable experience for the veteran American pugilists. Their modus operandi is to target what they see as an underperforming company, grab a stake, and set out a proposed remedy – be it board defenestrations, strategy overhauls or asset sales. They then apply fierce pressure, in public and behind closed doors, until the victim falls into line.Loeb, for one, hardly seemed able to believe it.
That’s the big strategic objective. They achieve this tactically, simply through protecting and prosecuting the interests of their largely retail shareholder base. Many of these punters hail from regional Australia – people Staude refers to as “Jim from Toowoomba and Jenny from Hobart”. So, she instead joined the back office of Commerzbank, and “a lucky break” got her onto the trading floor. Later she switched to Citi, and raced up the ladder to run the bank’s UK and Ireland trading desks. She tries to play down her stellar rise, but her husband butts in to say she is “always too modest”.Eventually, she began to feel the call of running her own show, and in 2011 she and a friend set up boutique advisory firm Affinity Capital, taking many clients with her.
“I wanted to bend that equation a little bit, and come up with something that would tie me to Australia. And that was the genesis of GVF, the fund we manage in Australia. It’s our biggest fund, it’s mainly retail investors, and we did it with [high-profile fund manager] Geoff Wilson.” To pull together the first $50 million, the couple went Down Under on roadshows together, using Wilson’s skills as a whisperer of retail investors. On those trips, Davidson fell in love with rural and regional Australia, and both became enamoured of the idea that they were in a position to champion the financial interests of the little guy.“Emma and I both spent time in investment banking,” Staude says.
But Peltz engineered a shareholder vote, which changed TI1 from a limited-life vehicle to a permanent one. That gave him the freedom to keep deploying the capital, but left GVF and its investors locked into their undervalued TI1 stock. “You look at capital markets today, the average holding period for a share in the US has gone from three years to two years, and today it’s nine months. So if you’re a board director, the shareholders come and go every nine months, you build no relationship with them, you never talk to them,” Staude says.
The wheat comprises those instances where a change in management strategy – or, in a worst-case scenario, a sell-off of the assets – could unlock that discount. Peltz had been putting more capital into the company, to buy out IPO shareholders at a discount to TI1’s assets. He was only ever going to make his own money back by extending TI1’s life.
“We try and engage. We try to do it ground-up, speak to shareholders, ask them, ‘What do you actually want?’,” he says. “It only gets hostile when the board is like, ‘I’m not listening’.”“Most boards want to do the right thing,” she says. “Most human beings want to do the right thing. I truly believe that. And even when they’re not doing the right thing, they still believe they are.
“What I like about that other cohort of investors is when you find something really interesting, you can draw down a lot of money to go after certain things,” Staude says.“We’re developing a fair bit of dry powder to go after some things in the next few years. And we’re able to go after much bigger targets than maybe we’ve done in the past, with this new capital.”
“We’re going to spend quality time with our kids in the morning before they go to school, have breakfast. And unfortunately, we’re going to have a nanny who covers us from six to eight at night,” Davidson says.
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