Shareholder activism has been widely studied and is often associated with value creation, as activist investors push for changes in strategy, governance, or capital allocation aimed at improving corporate performance and unlocking shareholder value. Recognizing the true potential of activist investing, two long-time Cevian Capital professionals, Tomas Johansson and Jens Tischendorf, realized there may be opportunities to enhance returns associated with shareholder activism by selectively investing alongside the best activist investors. The duo refers to this approach as “Shadow Activism.”
Johansson and Tischendorf subsequently launched Active Value Partners to implement this idea through the AVP Opportunities Fund, which aims to capture the value creation associated with activist campaigns while maintaining the flexibility of a liquid investment strategy. The strategy combines exposure to activist-driven value creation with active portfolio management, diversification, and daily liquidity, providing access to a return stream that has historically been accessible only to large institutional investors. The fund recently reached its three-year anniversary and has delivered an annualized equity return of 20 percent at market-level volatility since inception.
“We fundamentally have the same exposure to the value creation of activist situations but without the drawbacks associated with activist strategies.”
“We fundamentally have the same exposure to the value creation of activist situations but without the drawbacks associated with activist strategies,” says Johansson. Traditional activist investing typically involves board participation, significant ownership stakes, and long-term capital commitments. It also entails what Johansson describes as the “S-curve” of activism, somewhat similar to the J-curve commonly observed in private equity. “The notion that value is being created on day one is wrong,” he emphasizes. “That’s only the day when the active work starts, and it becomes a multi-year journey to actually effectuate change.”
Three Pillars of AVP’s Shadow Activism
At the core of AVP’s Shadow Activism approach is the idea of identifying the right activist situations and entering them at the right moment. “We try to invest in the right company together with the right activist at the right point in time,” explains Johansson. The first pillar of the strategy involves identifying high-quality companies trading below their intrinsic value. “We focus on fundamentally strong businesses that are underappreciated by the market and that we can buy at a discount to intrinsic value,” he says, emphasizing that the team does not automatically invest alongside activists simply because a campaign has begun.
“We try to invest in the right company together with the right activist at the right point in time.”
The second pillar focuses on identifying the right activist partner. According to Johansson, the success of activist campaigns ultimately depends on the individuals involved and their ability to execute change in the real world. “The second pillar is investing alongside the right activist, which really boils down to determining whether the people involved in a particular situation are the right ones to catalyze change,” he explains. “It’s super easy to put an activist thesis on paper. It’s very difficult to implement it in the real world.” This is where the duo’s background at one of the world’s largest activist investors becomes particularly valuable. Having spent years on the other side of the table, they believe their experience allows them to make informed judgments about which activists and campaigns are most likely to succeed.
“The second pillar is investing alongside the right activist, which really boils down to determining whether the people involved in a particular situation are the right ones to catalyze change.”
The third pillar relates to timing. Rather than attempting to trade activist situations around short-term price movements, the strategy recognizes that corporate change tends to unfold gradually. “The final pillar is about investing at the right time,” Johansson says. Drawing on their experience at Cevian Capital, the fund managers observed that activist campaigns often generate a short-term price reaction around the announcement date, which may subsequently fade. “You often see a flow-driven effect where the stock initially moves up, and then, when that effect reverses, it comes down again,” Johansson notes. “People then tend to think the opportunity has already played out. But in reality nothing has happened yet, it hasn’t even started.”
Capturing the Value Creation of Activism
The Shadow Activism strategy seeks to capitalize on this dynamic by participating in the S-curve of value creation, particularly by entering positions once the initial excitement around an activist announcement has subsided. “In reality, change happens much slower inside companies, and it takes even longer for the market to appreciate what has happened,” argues Johansson. Transforming a company often requires fundamental governance or operational changes, such as replacing board members, reshaping management teams, or implementing strategic adjustments. “If you want to change a company, you may need to change the board or the management team. That is a multi-year process, and initially it can be quite volatile. We have the luxury to come in later, when things are moving in the right direction.”
“In reality, change happens much slower inside companies, and it takes even longer for the market to appreciate what has happened.”
Unlike traditional activist investors who typically hold large stakes and remain committed to campaigns for several years, AVP maintains full portfolio flexibility. “We retain the ability to wake up tomorrow and change our mind,” Johansson says. The fund can exit positions if something more attractive comes up or the investment thesis fails to play out as expected, without moving the share price or impairing the value creation process at the company. This flexibility also allows the strategy to avoid some of the structural constraints associated with activist funds, where large stakes and public involvement often make exiting positions difficult.
The fund typically runs a concentrated portfolio of roughly 20 holdings focused primarily on European activist situations. This includes what the team calls a “toe-hold portfolio,” consisting of three to five companies that meet the criteria for activist situations but where no activist has yet taken a stake. These investments are typically fundamentally attractive value opportunities in their own right. “We would not be surprised to see activists entering these situations over time,” Johansson says.
“In a way activism is the antithesis of passive investing. These investors spend tremendous amounts of time, energy, and resources to ensure they make good investments.”
As passive investment vehicles continue to gain a larger share of equity markets, Johansson believes activism, plays an increasingly important role in generating alpha and improving market efficiency. “In a way activism is the antithesis of passive investing,” he says. Activist investors typically concentrate their capital in a limited number of situations and devote significant time, resources, and analytical effort to understanding companies and engaging with management. “These investors spend tremendous amounts of time, energy, and resources to ensure they make good investments,” Johansson concludes. “They are almost exclusively fundamental, value-oriented investors, and they contribute positively to the price discovery mechanism of the market.”
