Barington Capital Group is one of the best activist investors that few people have ever heard of. It’s also a good example of why hedge fund investors should not judge a firm by the size of its capital base.
The New York firm, founded by James Mitarotonda in 2000, has a fraction of the assets of San Francisco–based activist ValueAct Capital, which was founded the same year but now has $19 billion. Even so, Barington has posted a very strong 15-year track record, in many cases from investing in larger-cap companies, even as luminaries such as Pershing Square Capital Management and Greenlight Capital struggle and smaller activist wannabes like LionEye Capital Management shut down.
Now, Barington is gearing up for a potentially big expansion. In the first quarter of 2016, it plans to launch a new offshore fund, according to a person with knowledge of the firm’s plans.
It is not known how much the fund plans to raise. However, the firm is said to believe it could easily handle $1 billion and as much as $2 billion in assets under management. Barington declined to comment.
The fundraising is taking place following the firm’s recent hiring of industry veteran Marjorie Kaufman as a partner in charge of marketing and investor relations. She was previously head of marketing at Guggenheim Global Trading, a multistrategy hedge fund, and spent several years at Kingdon Capital Management before that.
Size has never kept Barington from successfully targeting high-profile companies, drawing on its strong analytical team. For example, it targeted Darden Restaurants months before Jeffrey Smith’s New York–based Starboard Value did.
Barington sometimes teams up with other activists or comes up with creative partners, such as marketers of special purpose vehicles (SPVs) or blank check companies, which raise additional money for a specific deal. More recently, last week it targeted Avon Products, an old-line company that started off selling perfume door-to-door. On December 3, Barington said it had teamed up with NuOrion Partners, a Zurich-based investment firm that specializes in creating SPVs, and other investors to gather more than 3 percent of Avon’s stock, calling on the company to institute a restructuring and bring in new independent directors.
Last week the firms filed with the Securities and Exchange Commission the establishment of the Barington NuOrion Fund IA, an SPV that raised money from several domestic investors. They have also brought in non-U.S. investors for the deal, according to a person with knowledge of the firm.
Barington is also a longtime investor in Philadelphia-based auto services and retailer Pep Boys, which in October received a takeover offer from Bridgestone Retail Operations, a subsidiary of Japanese tire maker Bridgestone. Last week Carl Icahn’s New York–based Icahn Enterprises topped that bid, but on Monday, Bridgestone revised its bid by matching Icahn’s offer.
And last week, Portland, Oregon–based Blount International, another longtime Barington investment, which makes outdoor products, lawn mowers, and industrial and power equipment, agreed to be acquired by investment firms American Securities and P2 Capital Partners for $855 million, including the assumption of debt.
Meanwhile, back in May, Caldwell, New Jersey–based the Children’s Place, the children’s specialty apparel retailer, reached a deal in its proxy fight with Barington and Macellum SPV II, agreeing to place on its board one of the activist’s nominees and another mutually agreeable individual.
Also in May, two of Barington’s nominees — including Mitarotonda — were elected to the board of the Eastern Co., a Naugatuck, Connecticut, maker of industrial hardware, security products and metal products.
Little surprise, then, that the Barington Companies Equity Partners fund is up 7.6 percent for the year through November. And given the recent activity in several of its main holdings, the fund is probably up a fair amount this month as well.
The fund also posted double-digit gains in three of the four previous years. As a result, it has compounded at 11.4 percent over the past three years, 10 percent over the past five and 10.4 percent since its 2000 inception.
Once it aggressively boosts its war chest next year, it will be able to add heft to its savvy stock-picking skills.
