Activist hedge funds typically send requests to multiple so-called expert networks when they try to find ex-employees and other knowledgeable people to talk to about a potential target company ahead of — or amid — an insurgency campaign, Inex One CEO Max Friberg explained on the Activist Investing Today podcast.

“Most [hedge funds] will engage with more than one expert network to cast a wide net and get the best information possible for the most important business decisions,” Friberg said. “It’s a jump ball between [expert networks] as they compete to find the experts for the activist. Every network has a different database of experts and focus. Some only do certain geographies, such as the German-speaking part of Europe, or an expert network focused on Japan. Others have specific industry verticals for experts, such as healthcare.”

Friberg said many activist portfolio managers have hired expert networks to employ teams of researchers to identify ex-employees, customers, distributors and competitors, as well as sector experts, who’ll talk to fund managers for a fee. Overall, expert network industry revenue surpassed $2.28 billion in 2023, generated by more than 100 expert networks operating in the U.S., Europe and Asia, Friberg added.

The networking firm, Friberg explained, has strict compliance protocols, and won’t set up conversations with employees at targeted companies, and they will typically have internal guidelines to make sure the ex-employee had left the company at least six months before the call, or longer. “You don’t want to trade on material nonpublic information,” Friberg said. “If they hear MNPI they can’t trade on that information.”

Check out the podcast with Max Friberg below:

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