Episode summary
201: “The Craft of Active Equity Ownership.” The Cevian Approach to Activism, with Managing Partn...
Money Maze Podcast
· · Guests: Lars, Carl Icahn
Summary
Lars Forberg argues that Cevian’s edge comes from behaving like a long-term owner in public markets, where investors are often “passive, myopic and underinformed.” The fund concentrates on a small number of European and UK companies, typically holding about 12 names and making only a couple of investments a year, so it can spend years understanding industries, management teams and the real causes of underperformance. He says the goal is not to predict six-month share prices but to help transform businesses over a five- to seven-year horizon.
The guest describes a disciplined screening process: avoid industries with unpredictable technological or cyclical risk, look for companies with good products but weak execution, and only invest when there is both a plausible value-creation plan and a path to implementation. He says Cevian often speaks to many stakeholders before buying and prefers constructive, behind-closed-doors engagement over public confrontation. In practice, that can mean board participation, changes in governance, strategy or operations, and a close dialogue with CEOs and chairmen.
He contrasts this model with private equity, which he says has become crowded and highly standardized, while Cevian still faces limited competition. He also says Europe’s governance framework and valuation discount to the US make the region attractive, and that Cevian’s portfolio is more conservatively financed than the market, with net debt to EBITDA around 1.3. AI may help with analysis, he says, but it will not replace the judgment needed to identify root causes and drive change.
Key takeaways
- The guest says Cevian targets a handful of European and UK companies and holds them for about five to seven years, not six months.
- He argues that public markets lack active owners, creating an opportunity for concentrated investors to act as catalysts for change.
- He says the best opportunities are in attractive industries where the company is underperforming but can still be fixed through a broad, practical change program.
- He says Cevian usually does extensive homework before buying and often speaks to 100 to 150 people in an industry before taking a position.
- He says Europe offers a better governance environment than the US for engaged owners, and listed European equities can trade at about a 30% discount to US peers.
- He says AI can help with research, but it will not replace the work of diagnosing the root cause of underperformance and executing change.
Notable quotes
“The investors in the public markets are typically very passive, myopic and underinformed”
“We want to invest in a company with at least a 10-year horizon in terms of understanding what's going to happen to this company and its industry”
“we have an average 12 companies in our portfolio and maybe hold them for five, six year on average, making two investments a year”
“we look for companies that are underperforming”
“AI is not going to be a competitor in that. AI will help us and help many of our companies but will not be a competitor what we're doing”
How the episode opens
The investors in the public markets are typically very passive, myopic and underinformed. That means that what we can utilize is exactly that our strategy is designed to use those flaws of the market if you wish where we can act as an owner. Uh where their market is myopic.
We can think in 5 10 year perspectives and where the market is highly diversified in owning lots of companies. So nothing is important to them. Private equity is now an incredibly competitive business where almost everyone in private equity is acting the same way.
They look the same, they talk the way, they think the same way, they they they have the same advisories and so on so forth. Everything is similar which means I mean if you study microeconomics everyone knows that if you have you know full competition and everyone there's no edge anywhere then you know you won't be able to outperform and I think that's a little bit where private equity is going. Of course, there will be some private equity funds that are better than others.
Um, but we have the benefit that we have not only a high value added strategy, but also with very limited competition. Activism might be one of the less helpful terms in modern investing. A label that conjures up everything from boardroom bustups to tur exchanges between shareholders who are disgruntled and incumbent management.
However, not all activism is equal. And both at our own money maze allocator summit last year and this year at I Connections in Miami, I've had the chance to observe, understand, and listen to Sevian Capital, Europe's largest dedicated active ownership fund. Their approaches appear to us to be neither opportunistic nor headline driven.
In fact, publicity shy and long-term. It appears to be methodical, deeply researched, relentlessly operational.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- active equity ownership
- shareholder activism
- board engagement
- operational improvements
- european listed equities
Companies and tickers mentioned
- Cevian
- ABB
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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