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Fields of Gold? Jana seeks new money, allies with impact hedge fund

From Reuters - January 12, 2018

BOSTON (Reuters) - Wall Street investor Barry Rosensteins new impact investing fund aimed at serving environmental and social causes could, if he plays his cards right, enhance his traditional business of pushing companies to boost earnings.

The founder of JANA Partners has tapped British musician and activist Sting to sit on the new funds advisory board and burnish his credentials with green and socially conscious investors he hopes will pledge at least $1 billion.

That amount is a fraction of the billions that have been pulled from Jana since 2015. Its assets have shrunk by more than half to $5 billion since then, as hedge fund investors fled to cheaper, passive products. Still, it gives him an important foothold in the growing arena of responsible investing.

Industry watchers said Rosenstein could forge more alliances with institutional investors that could carry over to Janas main business: pushing companies to make financial changes that often include recapitalizing or restructuring the business.

There is a longer game here than just this one fund, said a hedge fund industry advisor who is not permitted to speak publicly about individual hedge fund firms. The new fund will create a bridge with other institutional investors which Jana may need in its future activism.

People familiar with the fundraising say commitments have already been made and interest is high. The fund will not be a typical hedge fund product, people familiar with the matter say, noting the fees are expected to be lower.

Jana made its first foray into socially minded investments this month, pressuring Apple to give parents more control over the setup options of their childrens iPhones. The fund partnered with CalSTRS, the largest U.S. public sector teachers pension fund and one that is increasingly emphasizing social responsibility in its bets.

Calstrs does not invest with Jana but with $222 billion in assets under management, more than half of it in stocks, it could be a powerful ally in future activist fights. Apple reacted quickly, promising new parental controls, and the hedge fund industry is chalking this up as a victory for Jana.

Calstrs spokeswoman Michelle Mussuto declined to comment on its work with Jana.

Rosenstein cut his activist teeth during the 1980s heyday for corporate raiders, a background that has made traditional environmental, social and governance (ESG) activists doubt the sincerity of his pivot to socially conscious investing.

Last year, John Mackey, CEO of Whole Foods, called Jana greedy bastards as the hedge fund pushed for a sale of the grocery chain.

Charles Penner, a partner at Jana, defended the new direction.

It is not inconsistent with what we have done historically, it is just different, he said.

The Jana Impact Capital Fund is set to launch later this year. Joining Sting as an advisor is Patricia Daly, a nun who battled Exxon Mobil Corp over environmental disclosures. Sustainability expert Robert Eccles, who has taught at Harvard Business School, will also be on board. None of the three were available to comment.

WALL STREET CHOPS

Until recently, activism in the responsible investing space was largely the preserve of religious funds and public pension leaders with a genteel approach to boardroom battles and the patience to wait years for progress.

But now more major investors, including sovereign wealth funds and pensions, are pushing companies on issues like climate change, income and gender equality. By bringing some hard-charging Wall Street chops into this arena, Jana could stand out and, if successful, curry favor with such investors.

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