The past few years have been rough for activist hedge funds. No one knows that better than Tom Sandell, the founder and CEO of Sandell Asset Management in New York, once a high-flying $7.5 billion multistrategy fund management firm with a specialty in activist investing. The firm is now down to just $750 million from its peak in 2008, but Sandell is plotting something of a comeback with the planned launch of an activist hedge fund with a three-year lockup period.
While the markets were booming between 2006 and 2008, Sandell incited changes at a slew of well-known companies including Swedish automaker Volvo, credit rating firm Fair-Isaac, fast-food chain Wendy’s International, natural gas company Southern Union and software maker Sybase. Then his investor base dwindled. Now, having seen that investors can redeem and leave a fund manager bereft of the capital needed to wage an activist battle, Sandell is...