A tiny hedge fund is becoming a thorn in the side of energy giant BP
London-based Bluebell Capital Partners has a history of aiming at big targets, and sometimes hitting them.
LONDON—Giuseppe Bivona and his partners run a tiny activist hedge fund from a small office here not far from Buckingham Palace. The single room has big windows, seven desks and little space for much else.
From this unlikely perch, the fund, called Bluebell Capital Partners, aims to punch far above its weight by launching campaigns against some of the world’s biggest companies, most of them in Europe. Sometimes the punches land.
The fund’s latest target, British oil giant BP, has already granted Bivona a meeting with its chairman, according to people familiar with the meeting. And BP’s new chief executive officer, Murray Auchincloss, last week was compelled to refute Bluebell’s arguments when announcing the company’s otherwise rosy earnings report.
That might seem an outsize response to a fund that has accumulated a holding likely worth less than 0.01% of BP’s roughly $103 billion market capitalization, based on Bluebell’s general description of its portfolio. Bluebell declined to disclose its exact investment.
Bluebell’s criticism could resonate because it taps into a core challenge facing BP: its commitment to shrinking oil-and-gas production while boosting investment in less-profitable green-energy sources.
Meanwhile many investors, including Bluebell, simply want more of BP’s cash to be handed back to them.
In his opening salvo to BP, a letter sent in October, Bivona called the plan to invest more in clean energy at the expense of oil-and-gas production “irrational.” Bivona argues that doing so in effect strengthens competitors such as Shell, Exxon Mobil and Chevron, which aren’t setting short-term targets to dial back on drilling.
“You only make richer the shareholders of your competitor,” said Bivona in an interview. “I’m questioning how they deploy capital, for sure. Big time.”
During BP’s public earnings call last week, an analyst referred to Bluebell’s proposals as “sort of intriguing.”
BP appreciates engagement with shareholders, Auchincloss said in response, but he added that Bluebell is wrong on the merits of its argument.
“Obviously, we don’t agree with them,” he told The Wall Street Journal in an interview. BP hasn’t set new long-term oil-and-gas production targets and has said it is sticking with the strategy it previously laid out.
Bluebell backs BP’s commitment to long-term net-zero environmental goals, Bivona says, but he argues that the company is shrinking production faster than society’s demand is dropping off.
“The CEO doesn’t get it,” Bivona said.
BP should instead return more cash to shareholders so they can invest where they want in the energy sector, Bivona says—green or otherwise.
Some shareholders see Bluebell’s demands as the wrong kind of activism. “We don’t think responsible shareholders will allow a conservative investor to slow down a transition that is already moving far too slowly,” said Mark van Baal, founder of shareholder advocacy group Follow This, which has pushed BP and other major oil companies to cut carbon emissions faster.
BP last week promised to boost cash payouts to shareholders, part of a fourth-quarter earnings report that also included better-than-expected oil-and-gas trading results. Its shares were up 5.5% the day of the report.
Auchincloss said BP’s integrated strategy is working. Its ability to buy and sell renewable power alongside oil and gas through its trading arm boosts the baseline profitability of lower-carbon businesses, making them increasingly competitive with oil and gas in ways some investors don’t recognize, he said.
BP’s green strategy shift originated with former CEO Bernard Looney, who resigned in September under pressure over undisclosed details of relationships with colleagues. Former finance chief Auchincloss, who stepped in as interim CEO, was named permanent CEO last month.
Bluebell’s campaign is the latest sign of pressure on BP to defend its green-energy investments. It also reflects shifting debates over how the world’s biggest energy companies should manage the drive to reduce greenhouse-gas emissions.
After energy stocks tanked during the pandemic, investors openly questioned whether that marked the early-stage demise of fossil-fuel-based business models.
Three years ago, another small activist firm called Engine No. 1 took on Exxon Mobil in an expensive proxy fight, arguing that the U.S. giant didn’t have a plan for a future with shrinking oil demand and that it should invest more in the energy transition. The fund won three seats on the Exxon board, and the company later pledged to target carbon neutrality on its own emissions. Unlike some of its European peers, Exxon hasn’t pulled back on oil-and-gas production.
Since then, the Ukraine war and other geopolitical turmoil have intensified concerns about energy security and driven up energy prices. Exxon has enjoyed record profits the past two years, leading CEO Darren Woods to contend his cautious approach to the transition—and his steadfast commitment to oil and gas—was the right course.
Bivona and Bluebell co-founder Marco Taricco, both Italian, met at Columbia Business School in the 1990s before going on to investment-banking careers at Goldman Sachs and other banks, working in Milan, London and New York.
They started Bluebell in 2014 as an advisory firm providing investment ideas to other hedge funds, including Elliott Investment Management and Jana Partners, for years among the most feared U.S. activists, collectively managing billions.
By comparison, Bluebell started with about $20 million and now has $130 million in its main fund.
Bivona said Bluebell doesn’t need huge positions. It mobilizes support through other investors, unions and selective media interviews, according to marketing materials, without waging expensive proxy battles. For one such campaign involving a chemicals company, Bluebell bought a single share to make the point that size was overrated.
Bluebell’s main pool of assets is currently divvied up across holdings in about a dozen companies. The typical holding time of a position is 18 months, Bivona said.
The fund’s BP position is held through a type of equity swap, or derivative, closely linked to the value of BP shares and which can be converted to shares any time, Bivona said.
Bluebell’s main hedge fund has reported annualized returns of 8.3%, net of fees, since inception, according to a January 2024 investor presentation. That compares with a roughly 6.9% average annual return for activist funds across the industry for the same period, according to hedge-fund tracker HFR.
In 2021, Bluebell led a successful push for a shake-up at French yogurt giant Danone, joining forces with other activist funds. The chairman, who also was CEO, stepped down in March 2021 in what was a rare victory for activist funds in France’s rigid corporate landscape.
In other campaigns, Bluebell prodded mining giant Glencore to unload its thermal coal business and complained that asset-management behemoth BlackRock shouldn’t try to impose its ideological beliefs on the corporate world in the form of its push to promote environmental, social and corporate-governance—or ESG—concerns.
Glencore didn’t engage with Bluebell. BlackRock executives met with Bluebell privately, and the company said publicly that it disagreed with Bluebell’s climate- and corporate-governance campaigns at companies where BlackRock was invested.
Bivona says Bluebell studied BP and talked to investors for about a year before taking its position in September 2023. He won’t name those investors but says, “If you see the history of underperformance of the share price, do you think you will find a happy community?”
The fund’s October letter was earlier reported by the Financial Times.
BP executives, including Auchincloss, last week hit the road to meet with investors in Europe, the U.S. and elsewhere, as they typically do after year-end earnings.
Auchincloss said last week that investors are supportive of the company’s direction and mix of traditional and newer businesses.
“I think they will hear a different view,” Bivona said in response to the CEO’s comments. “It’s a debate. Let’s see where we go.”
Write to Jenny Strasburg at jenny.strasburg@wsj.com
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Business NewsCompaniesA tiny hedge fund is becoming a thorn in the side of energy giant BP
First Published:14 Feb 2024, 12:46 PM IST
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