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Ackman launches cheaper hedge fund aimed at wider investor pool

Published 02/07/2024, 12:31 PM
Updated 02/07/2024, 05:21 PM
© Reuters. Activist shareholder William Ackman of Pershing Square Capital Management speaks during the Canadian Pacific Railway Ltd. shareholders and analysts meeting in Toronto in this February 6, 2012 file photograph. For now, William Ackman is getting the better

By Svea Herbst-Bayliss

NEW YORK (Reuters) -Billionaire hedge fund manager William Ackman is launching a new investment portfolio in the U.S., according to a regulatory filing which suggests the fund will mimic his existing hedge fund but offering lower fees and quicker access to capital.

Pershing Square USA will be listed on the New York Stock Exchange and available to anyone who can invest in the U.S., including pension funds, endowments and retail investors who are normally excluded from hedge funds.

A pool of potential capital could come from Ackman's 1.2 million followers on the social media platform X where he discusses various issues as well as smaller endowments which could not write the big checks his original hedge fund required.

Hedge fund investors noted the lower fees and quick access to money could quickly make the new fund popular on Wall Street where high fees and regulatory hurdles have discouraged some investors from choosing hedge funds.

A spokesman for Ackman declined to comment beyond the filing and Ackman did not return a call for comment.

There will be no minimum investment, and the fund will charge a flat 2% fee every year after the first year. That compares with the performance fees of between 15% and 30%routinely charged by hedge funds.

Investors will also be able to get their money out quickly compared to the years it takes to fully redeem assets from Ackman's legacy hedge fund.

The new format is expected to be considerably more popular with some investors than the old hedge fund. For years, state pension funds and other institutions have pulled out of Ackman's fund for a number of reasons.

While the filing does not say how much money the fund is expected to raise, its fee schedule for underwriters says how much the banks will be paid if the fund raises as much as $20 billion, suggesting demand could be very high.

Ackman's Pershing Square Capital Management currently oversees $18 billion in assets, the bulk in a fund that is publicly listed in Europe.

Ackman, 57, recently ventured beyond telling companies how to run their businesses to focusing on antisemitism on college campuses. His campaign was a factor in the resignation of Harvard University's president.

The new fund will be structured as a closed-end fund that raises money through an initial public offering and then its shares will trade on the exchange. It will be managed by Ackman, Ryan Israel, the firm's chief investment officer, and other members of the investment team.

Recent rule changes also now allow funds to use derivatives more. These are tools that have netted Ackman's investors big gains over the past years through bets on credit markets during COVID and on interest rates last year.

Pershing Square Capital Management generally invests in roughly a dozen stocks and is currently invested in Chipotle Mexican Grill (NYSE:CMG), Universal Music Group (AS:UMG) and Google parent Alphabet (NASDAQ:GOOGL).

© Reuters. Activist shareholder William Ackman of Pershing Square Capital Management speaks during the Canadian Pacific Railway Ltd. shareholders and analysts meeting in Toronto in this February 6, 2012 file photograph. For now, William Ackman is getting the better of Carl Icahn in a well-publicized grudge match between the billionaire investors over Herbalife Ltd.    REUTERS/Mike Cassese/Files   (CANADA - Tags: TRANSPORT BUSINESS)

As Ackman's returns surged over the last years, interest in him and his funds has grown. The investor returned an average 31% gain a year over the last five years.

But his investment career has been studded with some notable losers as well, including a bet that Herbalife (NYSE:HLF)'s stock price would fall and that Valeant's stock price would keep climbing.

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