After suffering bruising losses, Ackman pursues quiet recovery
With a slew of downfalls, investor ‘went activist’ on Pershing Square
William Ackman, once an omnipresent rabble-rouser, is barely visible these days.
About a year after the shareholder activist stopped raising money for his private hedge fund in the wake of a pair of disastrous bets, Mr. Ackman has told his investors he is avoiding hard-to-understand companies, staying out of the media spotlight and returning to the basics of investment analysis that first catapulted him to success. Mr. Ackman, who had been riding high, came crashing down to earth in 2015 when a big bet he made on drug company Valeant soured. He also was hurt by a wager against the shares of supplement-maker Herbalife Nutrition Ltd. that didn’t go his way.
His private fund has shrunk by roughly $9 billion since its 2015 peak as a result of investment losses and redemptions, prompting him to hunker down and focus on his publicly traded vehicle, Pershing Square Holdings Ltd., which isn’t at risk of losing capital when investors flee.
“Performance was bad, investors were leaving, I was unhappy for a whole bunch of reasons,” Mr. Ackman said in an interview. He joked that he prescribed changes for his own firm as he does at companies he invests in: “I went activist on Pershing Square.”
Mr. Ackman says he is embracing a more Zen-like approach that allows for more days spent in his Manhattan office and less time traveling the world to hunt for new funds and hold investors’ hands.
It also allows him to spend more time with family, which includes three daughters from a previous marriage and a fourth due at the end of April with his new wife—Neri Oxman, an MIT Media Lab professor whom he married in January.
So far, the approach seems to be working, with the public fund up 31.9% this year.
But in an indication of lingering investor jitters, the shares are trading at a sizable discount to their net asset value, which most recently stood at $22.81. The shares closed Wednesday at $16.54.
The Wall Street Journal reported last spring that Mr. Ackman was facing a future without a private hedge fund amid a wave of investor defections.
While it has shed about another $1billion since then, Mr. Ackman says redemptions appear to have slowed and he plans to maintain the fund until no investors remain, or it becomes too costly.
At Mr. Ackman’s apex in 2015, his firm, Pershing Square Cap- ital Management LP, managed a total of around $20 billion. He outperformed during the financial crisis and notched notable wins at companies including mall developer General Growth Properties Inc.
But Pershing Square’s total assets have fallen to roughly $8.3 billion today.
The private fund has been especially gutted, dropping to roughly $3 billion from a high of $12 billion. Pershing Square also has a special vehicle that holds a sizable investment in Automatic Data Processing Inc.
Despite its recent travails, Pershing Square still has more than doubled the S&P 500’s net return since its founding in 2004.
Mr. Ackman hasn’t paid himself in the last few years to prioritize paying the firm’s staff of 38, which is about half the size it was at its peak. Mr. Ackman has moved much of his own personal fortune— which Forbes estimates has dropped to roughly $1 billion from more than double that a few years ago—from the private fund into the public one, a closed-end vehicle that made its debut in 2014 and has a market value of roughly $3.6 billion. Other investors have done so, too.
Once known for a televised clash with fellow activist Carl Icahn over Herbalife and for vowing to take his campaign against the nutritional company “to the end of the earth,” Mr. Ackman has returned lately to investing in “simple, predictable” companies like Hilton Worldwide Holdings Inc. He hasn’t publicly launched an activist campaign since his failed quest to get board seats at ADP in 2017.
“There are no wild bets anymore,” said a Pershing Square investor who attended one of Mr. Ackman’s investor meetings last month and like others declined to speak on the record. “It’s no longer a four bagger or a zero.”
Mr. Ackman has told people the public fund is more conducive to activist investing. While hedge funds are often at the mercy of investors who can pull their money and force the manager to sell shares to raise cash, departing investors in a public fund simply sell their shares to others.
But the public fund’s fees are less lucrative. And unlike most hedge funds, it doesn’t collect performance fees until it has made back losses for all investors.
Most of its investors have never paid performance fees and won’t owe them until the yearend net asset value of a share tops its previous high of $26.37, reached in 2014.
Mr. Ackman has vowed in the past to shift his focus, without necessarily following through. In 2015, he was heralded as “Baby Buffett” in a Forbes magazine cover story that described a “Pershing Square 2.0” modeled after Berkshire Hathaway Inc.
But in the following years, he carried on with bets like Valeant, which ultimately cost Pershing Square $4 billion, despite mounting red flags.
There are signs that the tenacity his investors both love and fear remains. Onstage at a recent investment conference, Mr. Ackman needled fellow hedge-fund managers about their stock picks.
The Pershing Square investor is encouraged by Mr. Ackman’s new tack but is taking a waitand-see approach.
“Could he become obsessive about some investment again in the future and be unable to release his teeth?” he asked. “Probably. Everybody has their nature and that’s part of his character.”