Relational Investors
Encyclopedia
Relational Investors is an activist investment fund based in San Diego, California
California
California is a state located on the West Coast of the United States. It is by far the most populous U.S. state, and the third-largest by land area...

. Founded in 1996 by Ralph Whitworth, the fund has $6 Billion in assets under management
Assets under management
Assets under management is a financial term used denote the market value of funds being managed by a financial instutition on behalf of its clients, investors, depositors, etc. This metric is a sign of size and success against competition...

. The firm primarily invests in value stocks of companies with market capitalization
Market capitalization
Market capitalization is a measurement of the value of the ownership interest that shareholders hold in a business enterprise. It is equal to the share price times the number of shares outstanding of a publicly traded company...

 of over $5 billion while charging a 1% management fee
Management fee
In the investment advisory industry, a management fee is a periodic payment that is paid by investors in a pooled investment fund to the fund's investment adviser for investment and portfolio management services.-Mutual funds:...

 and a 20% incentive fee on returns above the S&P 500
S&P 500
The S&P 500 is a free-float capitalization-weighted index published since 1957 of the prices of 500 large-cap common stocks actively traded in the United States. The stocks included in the S&P 500 are those of large publicly held companies that trade on either of the two largest American stock...

.

The fund tends to invest in specific target companies with the intent of exerting influence on management while getting its own board members elected. Typically, the fund looks for businesses with strong fundamentals and cash flows but are trading below their intrinsic value due to improper management.

Investment Strategy

Typically, Relational initiates a small stake in a target company of around $100 million. Then a request of audience is made to management and directors with a list of proposals to boost shareholder value.

If the target company is receptive, Relational will build its position to 5% to 10% of the equity
Equity (finance)
In accounting and finance, equity is the residual claim or interest of the most junior class of investors in assets, after all liabilities are paid. If liability exceeds assets, negative equity exists...

. If the company rejects Relational's advances, however, the firm typically will act on the threat of mounting a proxy fight and going public with its proposals.

The Fund typically pushes for large buybacks and dividends to shareholders.

Recent Investments

Relational currently owns 10.6 million shares, or about 4% equity in Genzyme
Genzyme
Genzyme Corporation is a fully owned subsidiary of Sanofi-Aventis. Before its acquisition, Genzyme was an American biotechnology company based in Cambridge, Massachusetts. In 2010, Genzyme was the world’s third-largest biotechnology company, employing more than 11,000 people around the world...

. Relational reached an agreement with Genzyme in January for a board seat. With Carl Icahn
Carl Icahn
Carl Celian Icahn is an American business magnate and investor.-Biography:Icahn was raised in Far Rockaway, Queens, New York City, where he attended Far Rockaway High School. His father was a cantor, his mother was a schoolteacher...

also having taken a 2% equity stake in the company, there is a possibility of a proxy battle.

External links

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