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26. ValueAct Capital Management / $17 billion

Location:

San Francisco, CA

Founded:

2000

2016 Hedge Fund 100 Rank:

No. 29

2016 Capital:

$17.64 billion

2015 Hedge Fund 100 Rank:

No. 33

2015 Capital:

$16.77 billion

Years on List:

Website:

www.valueact.com

Address:

One Letterman Drive, Building D
San Francisco, CA 94133

Phone:

415-362-3700

Fax:

415-362-5727

Other Office:

Boston

Profile & News

Firm Overview

San Francisco-based ValueAct Capital Management — founded in 2000 by Jeffrey Ubben, George Hamel and Peter Kamin — was one of the top performers among its activist hedge fund peers in 2013, outperforming the stock market’s 30 percent-plus gain on a gross basis. Investors can thank timely bets in the booming technology and pharmaceutical industries for the firm’s recent hot streak. ValueAct’s main fund was up 29.5 percent net of fees for 2013. Its stake in Valeant Pharmaceuticals International, the Montreal-based drug maker, nearly doubled in value, while shares of Adobe Systems, the computer software giant, gained 59 percent.

It was ValueAct’s position in tech titan Microsoft, however, that put it on the map. The low-key activist firm, which uses less disruptive tactics than its activist competitors, initially took a position in Microsoft in the first quarter of 2013. ValueAct boosted its stake by 75 percent the following quarter and added nine million shares in the third quarter. By year-end, Microsoft was ValueAct’s largest holding. Ubben’s bet has paid off thus far: Microsoft’s stock value has risen nearly 32 percent since ValueAct made its initial investment. The software giant has gotten off to a strong start in 2014, posting higher-than-expected returns in the fourth quarter of 2013. Microsoft is finally making a comeback after trailing its competitors since the tech boom of the early 2000s.

ValueAct is a relative newcomer to the top 100, owing to some tough times in the past. The flagship ValueAct Capital Partners fund was down 28 percent for two years following the 2008 financial crisis, and firmwide assets fell from $6 billion in January 2008 to $3.5 billion in January 2010. But by the end of 2010, performance had bounced back, and assets stood at $5.2 billion. ValueAct posted 42 percent returns in 2010, which landed the firm on Alpha’s Hedge Fund 100 ranking for the first time in 2011. Capital has grown by 223 percent since then.

Ubben, 53, perhaps is the most recognized of the three founders after rescuing Martha Stewart’s company during her insider trading scandal beginning in 2002. He took over as chairman of the board of Martha Stewart Living Omnimedia, recruited a top-notch board of directors and nursed the firm back to health through several key investments. ValueAct sold off shares as MSO’s stock rebounded, realizing $100 million on his initial $60 million investment. Ubben qualified for Alpha’s Rich List for the first time in 2012, earning $115 million the previous year thanks to a 15 percent net gain in the firm’s master fund. He qualified for the Rich List again in 2015, pocketing $175 million thanks to timely bets on Microsoft, Adobe Systems and Valeant Pharmaceuticals in 2014. Prior to co-founding ValueAct, Ubben was a managing partner at private equity firm Blum Capital and spent eight years managing the famed Fidelity Value Fund at Fidelity Investments.

Strategy

ValueAct is an activist hedge fund firm that aims to gain significant ownership stakes in undervalued companies, working with management and board of directors to employ new strategies. Partners and principals at ValueAct have served on almost 30 company boards over the years and have helped sell roughly 20 businesses. The firm maintains a relatively small portfolio, hovering around a dozen stock holdings. ValueAct does not hedge or take short positions but rather concentrates on making profit from winning long bets.

Funds and Fees Overview

The Legacy Fund holds long positions in companies with a market capitalization of $1 billion to $15 billion and invests in equity and equity-related securities, as well as corporate debt securities and derivatives, such as corporate bonds, notes and convertible securities.

AllCap Fund invests 80 percent of its assets in the Legacy Fund and 20 percent in a private fund family managed by ValueAct SmallCap.

SmallCap Fund, though in the process of liquidating its remaining assets, engaged in long-term concentrated active value investing in companies with market capitalization smaller than the Legacy Fund.

Fees for Legacy, AllCap and SmallCap Funds
Management Fee	1 percent to 2 percent of net assets per annum	Paid quarterly in arrears
Performance Fee	20 percent of net profits

The Co-Invest Fund and the Legacy Fund co-invest in public companies. The Co-Invest Fund charges no management fee but has a carried interest provision.

A minimum initial investment in a fund managed by ValueAct is $10 million.

Clients

ValueAct’s investors include high-net-worth individuals and institutional investors, such as trusts, endowments, foundations, sovereign wealth funds and corporations, among others. The firm also manages two master funds and eight feeder funds. The New Jersey State Investment Council invested $200 million with ValueAct in March 2013, added to a $100 million investment made in 2011.

Regulatory Assets Under Management (RAUM)*
Discretionary	$19.42 billion (8 accounts)
NonDiscretionary	$0 (0 accounts)
Total	$19.42 billion (8 accounts)

Employees	30
Clients	1–10 total	63 percent non-U.S.
Fiscal Year Ends	December
All data as of December 31, 2014. *Regulatory Assets Under Management (RAUM) includes no deduction of offsetting liabilities, thus representing gross AUM, not net AUM. RAUM calculations include leverage, proprietary assets and uncalled capital commitments, among other items not required in the calculation of AUM.

Owners and Executives

Name	Position	Position Held Since
Jeffrey Ubben	Co-Founder, CEO, CIO	06/2000
Briana Zelaya	Partner, Head of Marketing and Investor Relations	2000
G. Mason Morfit	President, Partner	01/2001
Kelly Barlow	Partner	08/2003
Allison Bennington	General Counsel, Partner	04/2004
Ryan Birtwell	Partner	06/2004
Gregory Spivy	Partner	09/2004
Brandon Boze	Partner	08/2005
Charles Siu	CFO, Partner	05/2006
Bradley Singer	COO	01/2014
Dorothea Kennedy	CCO	01/2014