Disney’s $3 billion bet caused Nelson Peltz’s hedge fund to underperform in 2023: Source

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From Reuters

Nelson Peltz’s Trian Fund Management’s $3 billion bet on Walt Disney outpaces its activist hedge fund peers, according to financial details provided to Reuters by Trian investors. This was the main reason for the management company’s poor performance last year.

The previously unreported details illustrate the high financial stakes for Tryon as he seeks to sway Disney’s board in the year’s most high-profile proxy battle.

The investor said Trian’s fund returned 10% last year, half the average return of 20% scored by activist hedge funds based on data compiled by Hedge Fund Research.

Trian’s position in Disney, which accounted for approximately 40% of the company’s total portfolio at the end of the third quarter, was a major factor in the poor performance.

Disney stock ended 2023 up 4%, while the S&P 500 index rose 24%.

A Trian spokesperson declined to comment.

Trian bought more shares in Disney in late 2022 and threatened to challenge the company’s board in January 2023, criticizing its streaming business losses, poor corporate governance and succession planning.

Trian CEO Peltz called off the board fight in February 2023 after Disney announced a major restructuring plan that included cost cuts and 7,000 layoffs.

“Disney is now going to do everything we wanted,” Peltz said at the time.

But with Disney stock languishing for much of 2023, Tryon changed his tune.

The company increased its ownership fivefold to about 2% and accused Disney CEO Bob Iger and the board of failing to deliver on a promised turnaround.

Trian announced last month that it would nominate Peltz and former Disney chief financial officer Jay Laszlo to Disney’s board.

The entertainment giant called on shareholders to oppose the move, arguing that Trian’s nomination would create chaos on its board.

Unless a compromise is found, a shareholder vote on the nominees is expected to take place in the spring.

ValueAct Capital, another activist hedge fund and Disney shareholder that, unlike Trian, backs the Disney board, returned 39% last year, Reuters reported. . ValueAct bought Disney stock in late 2023, long after Trian acquired the stake, when the stock was near its recent lows.

The value of Tryon’s shares in Wendy’s, the fast-food chain where Mr. Peltz is a director, fell 15% in 2023.

Indeed, Tryon won last year as well. The company’s portfolio was boosted by double-digit gains at plumbing parts retailer Ferguson and asset manager Janus Henderson Group.

Trian announced a year ago that during Mr. Peltz’s time on the board, the companies it invested in had an average annual total return of 9%, outperforming the S&P 500 index. No further updated figures were provided.