Most hedge funds and investment companies, activist or not, struggled in 2015. This was true for Corvex Management LP, as the nearly $9 billion Madison Avenue-based hedge fund found itself in plenty of headlines but failing to reach its lofty performances from prior years. Corvex had extremely public spats with the KFC-owning Yum! Brands, Inc. (NYSE: YUM) during 2015; it also disclosed activist positions in several other companies, notably American Realty Capital Properties, Inc. and Allergan plc.

The 2015 performance for Corvex was pulled down by two stock picks in particular: The Williams Companies and Platform Specialty Products Corporation. Platform started its precipitous decline in late June 2015, and share prices plummeted from around $27 per share to around $12 by December. The Williams Companies lasted until August, when falling oil and gas prices pushed the pipeline company down from $55 to $20 per share by early January 2016.

Keith Meister: Trained and Funded by Activists

Even in the hedge fund community, few investors received the kind of training and financial backing that Corvex founder Keith Meister received. Prior to the fund's launch in 2011, Meister was widely known as Carl Icahn's right-hand man. Meister took Icahn's philosophy of being aggressive, contrarian and confrontational, and bolstered it with $250 million in seed capital from George Soros.

The fund has been strong, although not the strongest among activist hedge funds, since its inception. From its filing until Q3 2015, Corvex's portfolio outperformed the S&P 500 by a three-to-two margin, with most of that gap created in 2013 and 2014. More impressively, the fund saw a 20x increase in reported market value since its first SEC filing in December 2011. That performance has been overshadowed in many ways by Meister and his antics.

Meister's style is controversial. Many fund managers are reserved, quiet and straight-faced; by contrast, Meister is outspoken and ornery, even more so than his famous former boss. In October 2014, the Wall Street Journal published an article that opened with the line, "Keith Meister takes things personally." It went on to describe the activist as "competitive" and "very emotional."

Meister has been sued multiple times for his professional and interpersonal actions, including a relatively high-profile showdown with the ADT Corporation's board of directors, on which Meister once served. In its lawsuit, ADT alleged that Corvex's leader "aggressively pressured and intimidated his co-board members" to participate in a repurchase of Corvex shares.

Though his style has earned him a legion of detractors and critics in the financial media and across corporate boards, Meister is respected by power players in the fund community because he drives results. "He's intense in the best sense of the word," said Aurora Investment Management executive Justin Shepard, one of Meister's investor clients.

Yum! Brands and Corvex

In Q1 2015, Corvex Management acquired an activist stake in Yum! Brands at about the same time Third Point Management, Daniel Loeb's hedge fund, took a much smaller position. Meister's group bought more than 15 million shares to become the largest shareholder; Loeb only grabbed 3.5 million shares for a distant second place. As a consequence, Corvex became the lead activist, although it is likely the two hedge funds worked with each other to promote shareholder value.

Corvex entered the Yum! Brands arena looking for a seat at the board of directors and a number of operational changes, including the sale of KFC Eleven and Super Chix and a spinoff of Yum!'s Chinese division. Meister and Loeb's activist activities were strategically timed around a switch at Yum! Brands for CEO, when Greg Creed replaced longtime executive David Novak. Creed, who had been chief executive at Taco Bell from 2011 to 2014, unwittingly walked into a firestorm.

Yum! and Creed initially balked at Corvex's requests, particularly the spinoff idea for the Chinese division. Creed received support from Novak, who became executive chairman of the board after leaving the CEO slot, although public dialogue between Corvex and Yum! was amicable. Yet, one by one, the demands from Meister and Loeb fell into place.

By April 2015, KFC Eleven was closed. By August, Super Chix was sold to an investment group headed by founder Nick Ouimet. About that same time, China was hit with its worst stock market collapse in years, leading to global concerns about a recession in 2016 and the bursting of an obvious asset bubble in the Far East. Chinese prospects were much more bleak, and the Yum! China brand was, thus, less valuable.

On Oct, 15, 2015, the fast-food operator announced it would add Keith Meister to its board of directors. Meister bragged about the company's "multiple avenues for unlocking significant long-term value" and said he would work expeditiously to "deliver that value to shareholders." It was a much-needed win for Meister, whose firm had suffered through a 24% drop in the Yum! stock price since making its position. The company remained openly committed to keeping its China division intact, though that did not last.

By Oct. 20, 2015, Yum! announced a plan to split Yum! China and Yum! Brands, arguing the move would increase shareholder value and allow more room for KFC and Pizza Hut to grow. Meister's fingerprints were all over the rushed decision; the Chinese division could now grow debt-free, something Meister argued was imperative. Creed said the speed of the decision was based on "a lot of common ground" between the two individual proposals.

Corvex Portfolio In 2016

Heading into 2016, the Corvex portfolio is dominated by four positions that combine to make up greater than 50% of total value, this despite Corvex officially holding more than 100 different stocks. All told, the Corvex shares for Yum! Brands at $1.602 billion, The Williams Companies at $1.536 billion, Signet Jewelers at $687.7 million and Fidelity National Financial at $686.9 million had a total market value greater than $4.5 billion as of Q3 2015.

As with most equity hedge funds, Corvex struggled to capture the performance of 2013 and 2014. Meister and his staff responded to a sluggish stock market by turning over more than 67% of their portfolio, including large acquisitions of Aetna and Allergan to capture the health care market, and dumping energy plays, particularly Cheniere Energy. The Corvex portfolio, valued above $9.1 billion by mid-2015, entered the last quarter of the year having already dropped to $8.5 billion.

The Corvex portfolio ended 2015 with a heavy service-sector tilt, although there were still strong positions in energy, financials and health care. If any sector was noticeably absent, it was technology, an area that Meister and Corvex have never vigorously pursued.

Want to learn how to invest?

Get a free 10 week email series that will teach you how to start investing.

Delivered twice a week, straight to your inbox.