The Indianpost

Audley’s Julian Treger is showing there is still life in ‘an old man in the City

That, at least, is how shareholder activist Julian Treger used to see things. But that was when he was one half of Active Value – that fearsome investor that went to war with the boards of the retailer Liberty, jeweller Signet and glassmaker Pilkington.

Now a self-styled “old man in the City”, he says he has lost his taste for boardroom blood. “When you get older I guess you lose your appetite for that,” says the man now running Audley Capital after splitting from Brian Myerson, his former comrade in arms at Active Value, more than five years ago.

Treger has learnt another thing, too. “What I have realised is that you don’t need to own 29.9pc of a company to make sensible changes. If you play it right you can agitate for change with 1, 2, 3, 4pc stakes – if what you are proposing makes sense.

“As a smaller shareholder you can make very big changes. Institutional shareholders might be loath to get involved but they’re not stupid. They don’t ignore good ideas.”

Activism has certainly been at the forefront of corporate intervention recently, with American firms like Elliott seeking to change things at National Express and Actelion. But Treger has mellowed. “In the late 90s, the issue switched from finance problems to management problems. Shareholders were like absentee landlords. There was just no shareholder engagement. Trying to engage with management became very difficult.”

Hence the need for proper punch-ups. The problem, explains the married father of three, is that such aggression eventually becomes counter-productive. “The way we were doing shareholder activism became twisted,” he says.

“You had to start to make decisions for reputational rather than commercial reasons. Whenever you entered into a fray with management you just could not be bested by them, or you would start to be seen as a toothless lion.”

There was another problem, too: how to turn activism into successful investing. “You are also locked in this terrible commercial trap,” he adds. “In all your victories over management – you couldn’t stay invested in the company. Investors would say, fantastic, that was great. Now, get out and repeat the trick.

“When you lost your fight with management, you wouldn’t get out of the stock. You were stuck. So essentially, you ran the losers and cut your winners.”

Given such experiences, perhaps it’s no wonder that Treger is now trying a different approach. “Audley is a friendlier firm,” he says. “It engages with management with complementary skill sets.” His old colleague Brian Myerson has fared far worse in recent years. He was voted off the board of Principle Capital Investment Trust, where he had been chief executive. He also lost a very public court battle to renegotiate his £11m divorce settlement with his former wife, Ingrid, after details of a remarkable double life emerged. His long-time mistress, and their son, were living in a house around the corner from his £7m Hampstead mansion.

Treger says that he wishes no ill will to his old business partner, but that he prefers a more low-key private life.

The 47-year-old Harvard MBA is English by blood and birth, despite having a South African accent from growing up there as a child. He says that he wants his epitaph to read that he has done well by doing good, but many are still critical about the disruption caused by fund managers with short-term goals, whether they be simply hedge funds or so-called activist investors.

“Of course hedge funds add value to society. First of all they provide an alternative to conventional funds and choice is valuable. Second, many create better performance than long-only managers. And a large proportion of the wealth they generate goes towards good causes. More particularly, activist funds help keep management honest.”

Audley has also found a specialism that chimes with the current commodities boom: undervalued mining stocks. It’s not hard to see why he likes the sector, either, having made such a killing last year with his investment in Canadian mining outfit Western Coal. When Walter Energy of the US pitched up with a takeover approach, the broker of the deal – Treger – made $400m (£243m).

His involvement looks like terrific judgment tinged with a decent bit of luck. Back in 2007, Audley bought a stake in Cambrian, an Aim-traded business with a fistful of stakes in natural resources companies. Soon after it bought in, Audley realised that Cambrian’s stake in Western Coal was in danger of being written off: the Canadian miner had breached debt covenants on some of its borrowings.

Treger spotted an opportunity. He struck a deal to swap the loan for a convertible bond, which effectively gave him a controlling stake. Then, all beyond the public eye, he collapsed Cambrian into Western Coal and fired the company’s management. So he was sitting pretty when Walter Energy showed up.

The Western Coal deal netted the firm’s flagship $1bn fund a 90pc increase in 2010 – making it one of the most successful hedge fund returns of the year. For Treger, mining companies are such a rich seam because of the type of people now running them.

“Ten years ago mining was the backwater of corporate stock,” he says. “If you went to Harvard or INSEAD you went to work for a bank or a management consultant. You definitely did not go work for a mining company. No one did. So most of the people who now run mining companies are talented geologists. They are over-promoted mine managers who often just cannot cope.

“The men that have come to the mining sector with other skill sets – like Mick Davis from Xstrata – have done incredibly well because they have that wide-ranging corporate knowledge that you must have to run a big company.”

Audley can bring all that to the party, reckons Treger. “Financing knowledge, refinancing knowledge, strategy etc. We can really complement the board with specific knowledge that at times they can lack.”

Treger, who is currently agitating for change at Slyvania Platinum, is also an investor in Firestone – an Aim-listed gem company he claims will triple in value. But his scope runs beyond just mining companies.

He is also a shareholder in Mothercare, which he sees as a strong business globally even though it has struggled in the UK. Audley even bought into the debt for Battersea Power Station, the iconic, Grade II-listed landmark, which has just completed part of its debt-for-equity swap. It is currently looking for a partner to complete its ambitious development plans.

Treger says he is confident he will make money on the investment despite the endless list of companies that have failed in their attempts to build on the Battersea site.

Treger laughs off any suggestion that an old lion may no longer be good at hunting. Decades of experience, he says, changes how you do things. Kills for the sake of it may be in his past. But, he says, his instinct for making investors money is stronger than ever.



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