More mutual fund managers are now playing the role of activist, according to a new article by the Wall Street Journal.

Benjamin Nahum, portfolio manager at Neuberger Berman Group, has been one of the investors leading the charge, willing to take management to task and voice his disapproval instead of simply selling stock and going away, which was previously the route mutual fund managers used to take when displeased.

Nahum told the Journal: “When you get into one bar fight and you win, the next time you show up you get an even more serious audience.”

Activist Insight Online notes that Neuberger went activist 60 times over the course of 2018, following 79 occurrences in 2017. Going back to 2014, there were only about 40 such instances. One of the first major public disagreements Nahum had with management was with UltraTech Inc., about three years ago, regarding pay. It resulted in a shareholder vote that wound up ousting several board members.

And BlackRock CEO Laurence Fink recently told his investors that they would be more proactive in the future, writing in his annual letter: “The time has come for a new model of shareholder engagement.”

State Street Global is another passive investor that, earlier in 2018, went public with their demands for more women on the boards of companies that they owned.

Just as passive and active managers have different investing styles, they also have different activism styles. Active managers usually have analysts that specialize on specific weaknesses in a company and have an acute plan to unlock value. Index investors have a tendency to focus more on effecting change over the course of the long term, especially because they don’t have the leverage of being able to immediately blow out their stock if they're unhappy. This also puts renewed pressure on active managers to earn their keep.

Craig Wadler of Moelis & Co. stated: “If Larry Fink is making statements saying companies have to operate in a certain way and index funds are becoming more vocal, active managers risk looking like the most passive money.” 

And the tug-of-war between all types of funds - combined with the markets falling - has managers on their feet.

Nahum retorted with his reasoning for being more active: “I see the quants, the passives, the activists, hedge funds and private equity all raiding my client base. We’re under attack and losing market share.” 

Stocks have also seen a higher concentration of ownership among a smaller group of investors, which has made it difficult for companies to ignore when a shareholder becomes active.

Jim Rossman, head of shareholder advisory at Lazard Ltd told the WSJ: "It took some time, but many of these active owners woke up to the fact that if they wanted to realize more value from their investments, they’d have to become more active owners."

But for now, it is still a rarity that passive managers are openly critical of companies. Harvard Law School professor Lucian Bebchuk stated:  “Like index funds, most of the major mutual fund families that focus on active funds display a deferential attitude toward corporate managers in their stewardship choices and activities.”

And managers – both passive and active – have to deal with the fact that going public with their grievances can sometimes shine light on investments that have performed poorly. In addition, it may make management more likely to offer up a cold shoulder in the future.

Nahum concluded: “You bear the mark of a troublemaker. You might get shut out of small group meetings.”