Shareholder activism at nonbank financial institutions spiked in 2023 and continues to soar in 2024.

Investors launched 115 campaigns targeting nonbank financial institutions last year, according to S&P Global Market Intelligence data. This year is set to blow past that mark as 101 such campaigns were waged in first six months alone. Asset managers are the most common campaign target, comprising 39% of all nonbank financial institution activism targets since 2019.

Few campaigns have had favorable results so far this year, however, with just three successful and four settled, although 28 campaigns remained active as of July 15. The trend toward rising activism mirrors a similar dynamic aimed at banks.

A hot equity market and cool M&A spell have driven more activism activity in general. Shareholders are targeting increasingly visible underperforming companies to maximize their gains and spur turnarounds, said Andrew Freedman, co-managing partner and chair of Olshan Frome Wolosky LLP's shareholder activism practice.

Activist campaigns used to cluster between January and March, just before the nomination window for companies' annual meetings, but shareholders are no longer waiting for that window to launch their campaigns, Freedman wrote in an email to S&P Global Market Intelligence.

"There's been much more activity this summer than we've seen in the past," Freedman said.

Method matters

Nonconfrontational requests for board representation and nonconfrontational communications and engagement have been the two most common campaign tactics in the space since 2019, excluding shareholder proposals. The most successful tactic was legal proceedings, with a more than two-thirds success rate.

Phillip Goldstein, managing member and co-founder of Bulldog Investors, said his firm usually submits shareholder proposals or proxy fights. Bulldog Investors focuses on launching activism campaigns against closed-end mutual funds that have stock prices below net asset value, he said.

This year has been more active than years past, and the firm is building capital, allowing it to increase its activism, Goldstein said.

Asset managers and closed-end funds are susceptible to activism because their "creative approaches" to deploying their capital may lead to strategic disagreements with shareholders, said Zachary Davis, a partner at King & Spalding LLP who represents public companies, sometimes in shareholder activist-related proceedings. Davis said he expects the upward trend in activism to continue in the coming quarters.

Leading the charge

The number of investors willing to engage is shareholder activism is climbing, Olshan Frome Wolosky's Freedman said.

The five most active shareholder activists in the nonbank financials space since 2019 were Saba Capital Management LP, John Chevedden, Kenneth Steiner, Bulldog Investors LLP and the National Center For Public Policy Research.

Saba Capital, a hedge fund that specializes in tail hedge, closed-end funds and SPACs, has launched 92 campaigns since 2019, the most of any shareholder targeting nonbank financial institutions. The firm has 22 campaigns still active, with a recent campaign targeting Eaton Vance New York Municipal Bond Fund. Saba Capital disclosed that it plans to run a proxy contest for two board seats.

Chevedden, a longtime shareholder activist based in California, initiated two of the three successful campaigns this year. He successfully proposed an amendment to Humana Inc.'s bylaws in February to adopt a simple majority voting standard, and succeeded again by proposing the same change at Verisk Analytics Inc. in April.

The National Center For Public Policy Research is an activist group focusing on anti-ESG, pro-neutrality campaigns, said Scott Shepard, the group's general counsel and free enterprise project director. The organization has targeted some of the largest nonbank financial institutions, including Berkshire Hathaway Inc., Mastercard Inc., American Express Co. and Goldman Sachs Group Inc, often submitting shareholder proposals to amend the companies' human rights, social or diversity statements.