User:Tianyunliu/Relational Investors

Relational Investors is an activist investment fund based in San Diego, California. Founded in 1996 by Ralph Whitworth, the fund has $6 Billion in assets under management. The firm primarily invests in value stocks of companies with market capitalization of over $5 billion while charging a 1% management fee and a 20% incentive fee on returns above the S&P 500.

The fund tends to take highly concentrated bets, using its large purchases of shares in a company to exert influence on management and get its own board members elected. Generally the fund invests in companies with strong businesses and strong cash flows that it deems are trading below their intrinsic value because management has not taken the proper steps.

Investment Strategy
Typically, Relational initiates a small stake in a target company of around $100 million. Then a request of audience is made to management and directors with a list of proposals to boost shareholder value.

If the target company is receptive, Relational will build its position to 5% to 10% of the equity. If the company rejects Relational's advances, however, the firm typically will act on the threat of mounting a proxy fight and going public with its proposals.

Relational often seeks two board seats. "That way, David or I can always have a second to any of our proposals, thus forcing a board vote and making the issue a matter of record," Whitworth says. Yet they would prefer to effect change without going public or forcing their way onto the board. Confrontation, as Whitworth sees it, only leads to additional time and expense."

The Fund typically pushes for large buybacks and dividends to shareholders.

Recent Investments
Relational currently owns 10.6 million shares, or about 4% equity in Genzyme. Relational reached an agreement with Genzyme in January for a board seat. With Carl Icahn also having taken a 2% equity stake in the company, there is a possibility of a proxy battle.