Forget those equity-based hedge funds. Jana Partners is ditching two equity funds and doubling down on activist investing.
The firm characterizes the new strategy in a dry way as it describes its goal of shaking up managements in firms where it invests. “We will transform into a firm solely dedicated to our core competency of shareholder engagement,” said Barry Rosenstein, Jana’s founder, in a letter to investors.
The establishment will shut down the Jana Partners and Jana Nirvana funds, and is keeping its $1.5 billion Jana Strategic Investing fund, which specializes in activism. It will also launch a social activist fund, called Jana Impact Capital, to be managed by Charles Penner and Daniel Hanson.
The firm has chosen to pursue activist investing harder because it says these areas perform better than their newly liquidated funds.
“This is where we have delivered our best returns for investors, developed a real competitive advantage, made our mark on numerous industries,” said Rosenstein’s letter.
Since the firm’s inception in 2001, it regularly posted double-digit returns that surpassed the market. Then came the 2008 financial crisis. Jana’s regular hedge funds have underperformed in recent years. The Jana Partners fund fell nearly twice as hard as the market in 2018, although the industry as a whole lost around 4%, according to HFR. Stock-picking funds overall, such as Jana Partners, fell about 7% in 2018.
The activist strategy, however, is a different story for Jana.
Since its 2010 launch, the Jana Strategic Investing fund has returned an average of 15% each year. One of the edges this portfolio has is its non-traditional model. Rather than function like a typical “2 and 20” hedge fund, the activist fund operates like a private equity vehicle, a testament to Rosenstein’s roots in the space.
Jana regularly collaborates with institutional investors to help meet its environmental, social, and governance (ESG) goals with companies it takes a stake in. Last year, the firm teamed with the $214.9 billion California State Teachers Retirement System (CalSTRS) against Apple to push the tech titan into developing ways to help battle smartphone addictions in children.
Other notable ESG practices from Jana include its Whole Foods criticisms leading to the grocer’s Amazon sale and calling on chip manufacturer Qualcomm to slash costs and use the proceeds to reform its compensation structure.
Jana Partners could not be reached for comment.