James Chadwick, President of Alternatives, and Fred DiSanto, Chairman & Chief Executive Officer, recently participated in a panel discussion at the Cleveland Smart Business Dealmakers Conference.
This conversation explored how modern shareholder activism has evolved into a partnership-driven practice focused on long-term value creation for shareholders. This article shares the key thinking discussed and how they impact our approach to wealth management more broadly.
Three Ways to Own Equities
There are three distinct approaches to owning equities, each with different goals and time horizons.
- Passive investing means buying all stocks within an index and moving on.
- Active investing means narrowing your universe to companies you believe in and waiting for markets to recognize their value. You pick your spots, you’re patient, but you are passive once you own the stock.
- Active ownership means identifying the opportunity, engaging directly with the company, and helping execute change that creates value. This path requires both a clear investment thesis and the relationships to see it through.
How Active Ownership Has Evolved
Ancora primarily practices active investing on behalf of our asset management clients, but our Alternatives division practices active ownership in the form of activist investment strategies. The topic of active ownership has evolved a lot since we opened our doors.
In the late nineteen nineties and early two thousands, when an activist appeared in a company’s cap table, other shareholders typically grew excited. The stock often rose simply because the market anticipated change. But the environment has shifted significantly over the past two decades, particularly following major market disruptions.
The composition of the shareholder base has evolved. Passive index funds now hold enormous stakes in public companies. These firms have developed their own governance objectives, often prioritized differently than traditional metrics of shareholder value and operational performance. This creates a nuance many miss: activists and passive holders do not always align. Ancora Alternatives has witnessed this in practice, where the active shareholder vote supports our views, but resistance has come from the passive side, where governance philosophies often diverge from pure value creation.
Understanding this dynamic is essential. Activism requires persuading not just management, but shareholders. That requires credibility, clear analysis and relationships built over time.
Building Partnerships Through Dialogue
When Ancora Alternatives approaches a company, the initial conversation focuses on what the CEO and board are trying to accomplish. Often, Ancora has identified the company because its stock has underperformed both the broader market and its peer group, despite what appears to be achievable improvement.
The conversation begins with listening and learning. Ancora shares its perspective on strategy and value creation. If that resonates, the dialogue continues. Only when both parties recognize the opportunity do board members and attorneys enter the picture, at which point the formal engagement begins. By then, the relationship has a foundation.
The Timeline for Real Change
Shareholder activism is not short-termism dressed in a different suit. And it is not a strategy to buy a stock, wait for price appreciation, and exit. That approach would be unsustainable; there simply are not enough mispriced companies available to run a fund on that basis.
When Ancora identifies a company where it believes meaningful change is both achievable and necessary, the team typically thinks in terms of years, not quarters. The question is not whether the stock will rise in the next six months, but whether a disciplined, multi-year implementation of operational and strategic improvements will generate returns that justify the capital deployment and the effort required to see change through.
This longer timeline attracts a different kind of shareholder and company leadership. When a CEO knows an activist investor is committed to a multi-year partnership, not a quick trade, the conversation changes. Those relationships deepen, performance compounds and the returns reflect genuine business improvement rather than market enthusiasm.
Finding the Opportunity
Early in Ancora’s history, the firm’s activist strategy relied primary on the team’s due diligence to screen for companies based on various characteristics. Over time, the team has built relationships with other firms and professionals in the industries we operate in, adding another layer of insights to screen with.
Ancora typically builds a bench of director candidates during a campaign. These are individuals with deep experience in specific industries and functions. When the firm moves forward with an engagement, it may propose two board directors to work alongside existing board members. Pairing the right individuals matters. One might bring industry knowledge; the other might bring operational or financial acumen. Together, they can listen in the boardroom, build relationships with peers and execute change from inside.
The Director’s Perspective
For a director placed on a board by an activist, the early days resemble those of any new hire who was recommended by someone outside the organization. Board members know the director’s provenance. They interviewed the candidate and agreed to the appointment and the relationship begins there.
The most effective directors understand their role: they are neither a rubber stamp for the activist nor adversaries to the existing board. They are problem-solvers committed to operational improvement and shareholder value. When this balance holds, boards typically function better.
What This Means for Clients
Shareholder activist strategies can serve as a diversifier within a broader asset allocation. The returns generated by activist investors may be fundamentally uncorrelated with public market indices and passive equity strategies. This reduced correlation stems from the nature of the work itself, as value creation through operational improvement and strategic change happens on company-specific timelines, largely independent of broader market sentiment or economic cycles.
Consider the contrast: when equity markets decline sharply, passive holdings suffer proportional losses. A company improving its supply chain, fixing organizational misalignment or repositioning its business model creates real economic value regardless of whether the broader market is rising or falling.
This reduced-correlation return profile driven by the realization of certain event-driven catalysts may make active ownership an effective sleeve within diversified portfolios.
For many institutional and high-net-worth clients, a measured allocation to active ownership strategies, typically five to fifteen percent of overall equity exposure, may provide portfolio diversification and a source of value creation that performs meaningfully differently from the broader market. When integrated thoughtfully into an asset allocation, active ownership can complement rather than compete with passive and traditional active equity holdings, potentially reducing overall portfolio volatility while supporting long-term return potential.
If you have questions about these ideas or how they impact your broader wealth strategy, we invite you to connect with our team.