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Owl Spring Targets Activism with a Hedge

Tickers in this article: BBRY IGT VC

Corrected from 2:54 p.m. to reference investment in International Game Technology (IGT) and not International Technology Group (ITG)

NEW YORK
 (TheStreet) -- Activist investors such as Carl Icahn, Jeffrey Ubben of ValueAct Capital , Nelson Peltz of Trian Managemen t and Bill Ackman of Pershing Square have spent 2013 engaging companies as big as Apple , Microsoft , Pepsico and Procter & Gamble , however, some funds entering the business are content to take on smaller parts of the stock market.

Owl Spring Asset Management , a combination of Ader Investment Management and Cumberland Associates , is poised to launch with $225 million in assets under management and a strategy of imparting change at under-performing or mismanaged companies between $200 million and $2 billion in size. The firm will also look to hedge its investments with a portfolio of short positions that may be unique among so-called activist funds.

The fund's creation, which was announced on Wednesday, also comes at a time when small and mid-sized firms are generally overlooked by the business press and retail investors. Meanwhile, a rising number of initial public offerings in 2013 and the poor performance of some once high-profile firms is creating a new crop of companies for activists and value investors to target.

Owl Spring will be run by Jason Ader, a prominent gaming analyst who successfully advocated board changes at International Game Technology  this year with his firm Ader Investment Management . Ader will be joined by Andrew Wallach, the CEO of Cumberland Associates, the predecessor of Owl Spring Asset Management.

Cumberland Associates also has a record of value and change-based investments.

The firm was part of a group of funds that recapitalized auto parts supplier Visteon after the firm's 2009 bankruptcy and helped it re-emerge as a public company. In the past, year Visteon has also changed CEOs, streamlined its assets and increased its share buyback authorization to $1 billion.

According to a spokesperson, Ader Investment Management has returned 40.05% this year, following a 14.92% in 2012, while Cumberland Associates has posted an impressive annualized 14.5% rate of return over 43 years.

SEC filings as of June 30 show that United Rentals , Liberty Media , General Motors , GenCorp and AIG were Cumberland's top holdings. The fund also opened position in Regions Financia l and ING US in the second quarter, the filings show.

Ader and Wallach spoke in a telephone interview about their strategy to grow Owl Spring into a "constructivist" fund. The firm will concentrate on debt and equity investments across the retail, technology, media, gaming, financial and energy sector.

In spite of a rash of activist investments in 2013 and the rise of new funds such as Starboard Value , Barington Capital , Marcato Capital , Ader and Wallach say there are plenty of opportunities for investors seeking to create value by way improving poor capital allocation or corporate governance policies. They also don't appear to be overly concerned about a rise in stock market valuations through 2013.