It's no longer an insult to be called an activist investor.
Once painted as greedy corporate raiders, they would amass large stakes in a company and, through brute force, push for changes in the company's leadership and business practices. They reveled in their image of attacking the fortress of corporate America. Now, some three decades later, their efforts have become more sophisticated and they are often seen as a good thing, shaking up companies too entrenched in their ways.
The beneficiaries of this new attitude are activist hedge fund managers like David Einhorn and Daniel S. Loeb, who last year rattled the corporate boards of some of America's biggest and best-known companies. They are beginning the new year with swelling coffers and more public support than ever before.
(Read more: 2014 hedge fund predictions)
David Einhorn, president and co-founder of Greenlight CapitalScott Eelis | Bloomberg | Getty Images
The industry suffered middling returns compared with the gravity-defying stock market in the United States, but some activist hedge funds outperformed stocks last year. And in a show of support, investors poured an estimated $10 billion to $12 billion of new money—a record—into the funds' war chests, bringing their total assets to more than $100 billion,according to data from Hedge Fund Research.
Even Mary Jo White, the Securities and Exchange Commission chairwoman, has taken note of the increasingly important role played by activist investors. "It was not that long ago that the 'activist' moniker had a distinctly negative connotation," Ms.White said in December at a conference on corporate governance in Washington."But that view of shareholder activists, which has its roots in the raiders of the 1980s takeover battles, is not necessarily the current view and it is certainly not the only view."
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Activist investors, who buy up shares in a company with the intention of gaining enough control to demand changes to its business, are best known for publicly admonishing executives as lazy and overpaid and calling on companies with huge cash piles to share their riches with shareholders.
(Read more: Wall Street—The day of reckoning nears)