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Exclusive: Ubben seeks $8 billion for new hedge fund amid talks with Exxon – sources

Jeffrey Ubben, Founder & CEO at ValueAct Capital, poses for a portrait before speaking on the Reuters Newsmaker event' "The Future of Shareholder Activism" panel in Manhattan, New York, U.S.

(Reuters) – Jeffrey Ubben, a hedge fund veteran in talks to join Exxon Mobil Corp’s board, is seeking to raise as much as $8 billion for his new socially and environmentally conscious fund, according to people familiar with the matter.

This would be the first fund Ubben has amassed since he launched his new firm, Inclusive Capital Partners, last summer. He left ValueAct Capital, the activist hedge fund he co-founded in 2000, while retaining stewardship of the ValueAct Spring Fund, a $1.2 billion capital pool focused on environmental, social and corporate governance (ESG) investing.

The fundraising comes as Ubben is negotiating what would be a major boon for his new firm and himself – a board seat at Exxon, the most valuable U.S. oil major.

The Irving, Texas-based company is under pressure from investors, including hedge funds Engine No. 1 and D.E. Shaw, to cut costs and tackle its impact on climate change more forcefully. Engine No. 1, which is also focused on ESG investing, has put forward four of its own nominees for election to Exxon’s board. Ubben is allied with D.E. Shaw.

An agreement to add Ubben to Exxon’s board, which could help the energy giant burnish its environmental credentials, may come as early as this week, one of the sources said. It’s not clear how much of the new fund Ubben would use to invest in the company, which has a market capitalization of $220 billion.

Exxon declined to comment.

Eva Zlotnicka, one of Inclusive Capital’s co-founders and a managing partner, told investors and lawyers on a private Zoom call organized by the New York University School of Law’s Institute for Corporate Governance and Finance two weeks ago that the firm was seeking to raise as much as $8 billion for the new fund, three people familiar with the matter said.

Named Spring Fund II, the new capital pool would be used to invest in companies with environmental and social problems and help address them, Zlotnicka said on the call. Ubben and his partners at Inclusive Capital fashion themselves as “management consultants with an ownership stake to collaborate with courageous CEOs,” Zlotnicka said, according to the sources.

Inclusive Capital plans to amass stakes in roughly 15 companies, while expecting to get board seats on roughly half of them, the sources said.

While Zlotnicka did not discuss the fund’s fees on the call, one of the sources said they would be significantly lower than those of the first Spring Fund. That fund charged a 1.5% management fee and 20% performance fee, which is customary among hedge funds. Investors in Spring Fund II would be expected to lock up their money for five years, the source added.

All the sources requested anonymity because the fundraising process is confidential.

Ubben did not immediately respond to a request for comment.

Over the span of two decades, Ubben and his team at ValueAct pushed for changes at some of the world’s most prominent companies, from Citigroup Inc and Morgan Stanley to Microsoft Corp and Rolls-Royce Holdings Plc. Ubben avoided proxy contests to replace board directors, preferring to work behind the scenes to win the backing of corporate boards.

Yet he gradually grew disillusioned with what he saw as hedge funds’ short-term investment agendas. He launched the first Spring fund in 2018 to focus on ESG, an area of investing that has become increasingly popular on Wall Street.

The fund invested in BP Plc, another oil major, as well as electric truck maker Nikola Corp and power utilities Hawaiian Electric Industries Inc and AES Corp.

Some of the Spring Fund’s early bets soured. After Nikola’s shares soared following its merger with a blank-check acquisition company, they stumbled amid production challenges, criticism from short sellers and a decision by General Motors Co in November to downsize a co-operation agreement.

(Reporting by Svea Herbst-Bayliss in Boston; Editing by Greg Roumeliotis and Steve Orlofsky)

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