Glenview Capital Management is expressing confidence in its strategy as it launches a proxy battle against hospital company Health Management Associates.
The New York-based hedge fund has set up a new share class that charges a higher performance fee in exchange for a lower management fee. "Our firm will purchase, up to $20 million annually, the right to an additional 10% incentive allocation for an amount that is equivalent to an annual 1.5% rate," the firm told investors this week, according to AR magazine.
The $6.4 billion firm expects some of that additional incentive allocation to come from Health Management, whose board it is now seeking to toss. Glenview said today it would nominate eight candidates to HMA's board, alleging that the current directors have failed to create shareholder value.
"There is significant room for improvement at HMA," Glenview said. "For over a decade, despite the best efforts of well-intentioned individuals at the company, HMA has fallen short in their financial returns delivered to shareholders, their financial management and focus, our shared aspirational goals on regulatory compliance and the pursuit of a stable and effective leadership team."
Glenview's HMA effort is part of a larger bet that the U.S. healthcare reform law will prove a boon to for-profit hospitals. The hedge fund's top five, and seven of its top 10, are involved in the healthcare industry.