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Engine No. 1, the giant killer hedge fund, has its own big plans


It was portrayed as a new David-J-Goliath tale for Wall Street. A small hedge fund called Engine No. 1 opposed the most powerful US oil company, winning three seats on its board with a mandate to build it. free of future fossil fuels.

With a total of 22 employees և $ 240 million in assets under management, he agrees last performance, Engine No. 1 letter to ExxonMobil’s management on December 7 – its activist statement – was unlikely to cause a terrorist attack at a major Texas oil refinery.

Media attention It also focused on DE Shaw, a $ 55 billion hedge fund that undertook a shorter-term change campaign over the same period.

The No. 1 engine was weeks ago, with a stake in the $ 250 billion market capitalization oil group with a total value of just $ 50 million, or about 0.02 percent.

But the No. 1 engine was not a flying night gear. Chris James Ames, its founder և its main source of capital, is a hedge fund industry veteran who has earned his fortune as a technology և biotechnology investor. His other firm, Partner Fund Management, which he founded in 2004, had $ 6 billion in assets at its peak, making it one of the largest hedge funds based on the West Coast.

PFM may be better known for its failures than its successes. It invested $ 96 million in 2014 Theranos, a blood test group was founded by Elizabeth Homs before the start-up company collapsed on fraud charges. The partner fund has sued Theranos for “fraudulently” investing.

With the No. 1 engine, James Ames hopes to take advantage of the growing interest of institutional investors in supporting environmental դրական socially positive measures.

“We were founded as an influential investment company,” he said. “We have many strategies within the company that we will offer, but Exxon’s urgency, given the scale of its impact, has forced us to present ourselves to the company through an active engagement strategy.”

“Good, good relationship”

James’s eavesdropped on another veteran, Charlie Pennner, for the No. 1 engine. Penn spent 15 years at Jana Partners, one of Wall Street’s most popular activist hedge funds, trying to settle for corporate giants such as Apple and Qualcomm.

Penner was captivated by the No. 1 engine, the idea for a new firm that focused directly on impact on investment, rather than the activism of Jana’s traditional hedge fund, which often focused on forcing the company to split, sell or return cash to shareholders.

Prior to his departure, Penn created a new fund called Jana Impact Capital, which would focus on improving companies’ environmental, social management (ESG) records. The company would consider rock star Sting and his wife, Trudy Styler, as advisers, and it led to sister Patricia Dali, a nun-activist who was familiar with Exxon shareholders arguing over more emissions disclosures.

But the foundation never really went off the ground. Jana, whose assets fell by more than $ 11 billion in 2015 to $ 1.5 billion by 2020. In the beginning, after years of insufficient performance from the outflow of investors, it focused on its own reorganization.

It was an ESG campaign by Penner against Apple, in which Jana partnered with Calstrs, the second-largest U.S. pension fund, to strengthen the iPhone maker ‘s parental control over its devices, prompting James to contact:

Pennner gained a reputation among investors և a certain influence. “Charlie has been living on the street with people like me for a decade, building good relationships,” said the CEO of Exxon’s top 20 shareholders.

At Engine No. 1, he called on his contacts at Calstrs, including Aeisha Mastagni, a $ 300 billion pension fund portfolio manager who has known Penner for more than a decade, to support the company’s ambitious campaign against Exxon. : ,

“Chris James Ames brought the capital to this campaign, Charlie brought his experience as an activist, and Calsters brought a constructive long-term [Exxon] shareholder, “said Mastagni.

The No. 1 engine, however, caused a great deal of discontent among Exxon shareholders © © Charly Triballeau / AFP Getty

“Sun batteries on the roof”

Proponents of her case have been working to make the actual transcript of this statement available online. Proponents of her case have been working to make the actual transcript of this statement available online. Calstrs voted against the re-election of all Exxon board members in 2020.

“Engine number 1 has its own capital, and Calstrs supports the change of underperforming companies like Exxon. That’s the story, “Penner said.

“They wanted to give the impression that we were saying, ‘Turn off the oil and gas pipes, start installing solar panels on the roof.’ What we are saying is this. “It simply came to our notice then. It can take 10, 20, 30 years. “

Exxon responded with pressure own climate initiativesfrom new emission reduction targets to the creation of a low carbon business. It appointed new directors, including FFF Ubben, another activist hedge fund manager who has invested in ESG in recent years. The changes were enough to satisfy DE Shaw, who ended his activist stance in March.

Engine No. 1, however, crashed into the well of Exxon shareholders’ grievances, arguing with a 80-page presentation that the company’s climate approach և its low financial performance was an integral part, և only in-depth board changes և strategy could fix it.

The result of the final voting, starting Exxon Annual Meeting Confirmed last week on Wednesday. Like former recycling executives Gregory Goff and Kaisa Hietala, whose election day was announced, Engine No. 1 secured a place for one-third of its nominees, venture capital investor Alexander Karsner.

Another verdict could be handed down later this year, as Engine No. 1 intends to raise money from institutional investors to boost the cash invested by Ames. It also filed a lawsuit: exchange fund to attract retail investors.

As for his next campaign, James Ames and Penner have not yet given up. Engine No. 1 has taken small positions in other companies, including agricultural equipment maker John Deere and commodity trader Bunge.

The company is looking for more “structural change opportunities,” Pennner said. “We have a few things in the cell.”



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