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(Reuters) - Richard Hurowitz, who has been running a $1 billion hedge fund since leaving Halcyon Asset Management LLC, made his foray into shareholder activism on Monday by taking on the boards of a Canadian and a German company.
Whipsawing markets driven by the euro zone debt crisis and uncertainty over global economic growth have made it more challenging for hedge fund managers to deliver the returns they have promised investors, spurring them to try new strategies.
"Shareholders in this financial environment are not going to be tolerant of boards that do not protect their interests," Hurowitz said. Hurowitz's Octavian Advisors LP said on Monday it would challenge the boards of Toronto-based water heater rental and submetering firm EnerCare Inc ECI.TO and Germany's Balda AG BAFG.DE, a manufacturer of medical and electronic products.
A graduate of Columbia University Law School, Hurowitz, 37, spent six years at Halcyon specializing on distressed debt investments and risk arbitrage in Europe, Asia and Latin America before founding Octavian in 2006.
Octavian, which is EnerCare's largest shareholder with a 13 percent share, said it had called for a special meeting of shareholders in order to add four directors to the company's six-member board,
It accused EnerCare's leadership of what it characterized as a failure to address long-term material underperformance, not selling the company when it could and launching a highly dilutive and unnecessary offering.
An EnerCare representative could not immediately be reached for comment.
Octavian also called for a special shareholders' meeting at Balda, accusing its top shareholder Michael Chiang of conflict of interest given his 25 percent stake in TPK Holding Co Ltd 3673.TW, a maker of touch screens for iPhones and iPads in which Balda holds a 16.1 percent stake that Hurowitz says should have been sold; he argued that delays have cost Balda shareholders 350 million euros.
"Upon receipt of the original of the request to call (an extraordinary general meeting), the management board of Balda AG will assess whether the request is to be accepted," Balda's management responded in a statement.
About half of New York-based Octavian's investments have been in Europe and 90 percent are outside the U.S., including Britain's IMO Car Wash Group Ltd and Dutch sports equipment manufacturer Head NV, both of which were distressed debt situations.
EnerCare shares were up 2.7 percent to C$9.05 in Toronto trading and Balda shares fell 5.5 percent to 3.12 euros in Germany. (Reporting by Greg Roumeliotis in New York, editing by Gerald E. McCormick)