By Lawrence Delevingne and Trevor Hunnicutt
NEW YORK (Reuters) - Jeffrey Ubben, the chief executive officer of activist investor ValueAct Capital, told Reuters on Wednesday that his firm had been taking money out of the capital markets as valuations have become overextended, leaving it with $3 billion in cash.
"I really feel that the large-cap activist plays are very treacherous with high PEs (price-to-earnings) and not a lot of growth," Ubben said, speaking at the Reuters "Future of Shareholder Activism" event in New York.
Ubben said that he was not focusing on any particular sector but instead looking for bets on idiosyncratic, mid-sized companies such as spin-offs and "weird" corporate structures.
ValueAct, based in San Francisco, manages around $16 billion. The fund's largest holding is a $2.4 billion stake in Microsoft Corp (NASDAQ:MSFT), the software company where ValueAct partner Mason Morfit is also a board director.
Ubben also weighed in on the administration of U.S. President Donald Trump, saying "everything about Trump I think is inflationary" while citing policies like a potential border tax. But he added that the looming increase in interest rates were more of a concern as a board member.
Ubben said he got "super lucky" with the Trump administration's proposed financial deregulation measures, which caused bank shares - including current ValueAct holding Morgan Stanley (NYSE:MS) - to spike. He said he sold some shares in Morgan Stanley following its price increase.
On the coming initial public offering of Snap Inc, Ubben said that he has no problem with shares that do not initially have voting rights as long as they eventually allow for shareholders to have their say.
"I understand it," he said. "If that's what it takes to get growth companies public and let the public participate in high-growth companies."
Ubben was a fund manager at Fidelity and a managing partner at private equity firm Blum Capital before founding ValueAct in 2000.
Ubben is a long-time advocate of giving CEO's more stock-based compensation tied to the company's total shareholder return. In an opinion article he published in 2012, he said the TSR model can bring a healthy appetite for risk to boardrooms and encourage growth.
ValueAct disclosed earlier this month a 7.1 percent stake in pharmaceutical company Bioverativ Inc. The fund also has a $1 billion-plus stake in media company Twenty-First Century Fox Inc.