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Bulldog Investors Builds Large Activist Stake In Hill International Inc (HIL) Leading Up To Candlestick Point Announcement

Bulldog Investors, which is managed by Philip Goldstein (pictured), Andrew Dakos, and Steven Samuels initiated an activist stake in Hill International Inc (NYSE:HIL), according to a recent filing with the SEC. The holding comprises 3.33 million shares, with 1.59 million of them having shared voting power and the remainder having sole voting power. The stake amasses about 6.61% of the company’s outstanding stake. This development has been announced on the heels of a recent announcement by Hill International Inc (NYSE:HIL) that it received a contract from the affiliates of Lennar Urban and Macerich Development to provide its services in connection with the development at Candlestick Point in San Francisco. However, Bulldog has been amassing its stake dating back over two months.

Phillip Goldstein Bulldog Investors

Bulldog Investors has run more than 60 proxy fights since its inception in 1992. Almost 95% of the fund’s holdings are in the finance sector, as the firm’s strategy is based on attacking funds that are selling at deep discounts to their net asset value and then forcing their management to narrow that gap. However, Hill International Inc (NYSE:HIL) is not part of that broad strategy, though other possible catalysts such as the Candlestick Point project have made it an attractive investment. Bulldog currently has about $619 million in regulatory assets under management.

Phillip Goldstein, Andrew Dakos And Steven Samuels
Phillip Goldstein, Andrew Dakos And Steven Samuels
Bulldog Investors

First a quick word on why we track hedge fund activity. In 2014, equity hedge funds returned just 1.4%. In 2013, that figure was 11.3%, and in 2012, they returned just 4.8%. These are embarrassingly low figures compared to the S&P 500 ETF (SPY)’s 13.5% gain in 2014, 32.3% gain in 2013, and 16% gain in 2012. Does this mean that hedge fund managers are dumber than a bucket of rocks when it comes to picking stocks? The answer is definitely no. Our small-cap hedge fund strategy, which identifies the best small-cap stock picks of the best hedge fund managers returned 28.2% in 2014, 53.2% in 2013, and 33.3% in 2012, outperforming the market each year (it’s outperforming it so far in 2015 too). What’s the reason for this discrepancy you may ask? The reason is simple: size. Hedge funds have gotten so large, they have to allocate the majority of their money into large-cap liquid stocks that are more efficiently priced. They are like mutual funds now. Consider Ray Dalio’s Bridgewater Associates, the largest in the industry with about $165 billion in AUM. It can’t allocate too much money into a small-cap stock as merely obtaining 2% exposure would really move the price. In fact, Dalio can’t even obtain 2% exposure to many small-cap stocks, even if he essentially owned the entire company, as they’re simply too small (or rather, his fund is too big). This is where we come in. Our research has shown that it is actually hedge funds’ small-cap picks that are their best performing ones and we have consistently identified the best picks of the best managers, returning 123.1% since the launch of our small-cap strategy compared to less than 57% for the S&P 500 (see the details).

The $247.82 million industrials company, Hill International Inc (NYSE:HIL), provides consulting services primarily related to buildings, transportation, environmental, energy and industrials markets. The company has 4,800 employees and about 100 offices around the globe and was ranked as the seventh-largest construction management firm in the United States by the Engineering News-Record magazine. The newly awarded contract pertains to the $1 billion project on a 24-acre parcel of land on the grounds of Candlestick Park, the former home of the San Francisco Giants and San Francisco 49ers, since demolished. The new development includes an urban open-air retail complex comprising approximately 500,000 square-feet of gross leasable area, and featuring a premium retail outlet center. It will also have 2,400 parking spaces both below the retail complex and in an adjacent parking structure. The complex will also feature 262 residential homes and an entertainment facility.

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