Are his investors fucking morons? Nothing says ‘redemption’ like a -50% loss over two years. Not including today’s -10% nosedive in VRX, equating up to a $60 million loss for his fund, Ackman is reporting his year to date losses to be -26%, or -47% over two years.
Yesterday he reported a block sale of MDLZ, freeing up $800 million in cash. Immediately, rumors spread that the sale was made to meet redemptions. In an email exchange with CNBC today, Ackman said those rumors were fucking horseshit (I am paraphrasing a bit here).
Other investors speculated that Ackman might be preparing for a wave of redemptions prompted by his portfolio’s recent declines, which he said was not the case. Ackman said just 2 percent of Pershing Square’s assets, which total more than $11 billion — was redeemed on Feb. 15, the most recent opportunity to do so.
The next redemption opportunity for Pershing investors won’t come around until mid-May, Ackman noted, but he says he’s optimistic his investors will stay in the fund, going into detail about why the firm’s financial position is solid.
Ackman said Pershing Square has large cash balances in every one of its funds — averaging 14 to 15 percent throughout the portfolio.
He also pointed to three sources of so-called “permanent capital,” or money that can’t be redeemed — $4 billion dollars from his publicly traded vehicle, Pershing Square Holdings, which is traded in Amsterdam; $1 billion dollars from a recent bond offering; and just more than a billion or so in what Ackman described as “employee capital.” He called other money “long-term lock-up capital” where investors remain highly restricted in how they can redeem their money. As is common in many hedge funds – it could take Ackman’s investors up to two-years to get all of their cash back.
When asked about Valeant, he said “Valeant is a problem, but we know what to do.”
What sort of fuckery is this? The fund is down -26% and he ‘knows what to do?’ Perhaps he should seek outside counsel.
Does he know what to do with HLF too?
Because his 20 million share short position is deteriorating in the merits of its thesis rapidly.
If you enjoy the content at iBankCoin, please follow us on Twitter
He knows what to do? Does he mean that he knows he has to seek treatment for his gambling compulsion? He hasn’t been trading. He’s been gambling.
BIS + 4% half dozen other specialty pharma joining VRX south. OMG what happened to Cramer fave LLY?
I never understood why anyone would put their $$ in a hedge fund where they can only withdraw (redeem in fancy investor lingo) their $$ only during certain window periods.
I see the advantage for the owners of the fund but not much to be gained for the investors.
Somebody please explain ( I get the illiquid arguments and the withdrawal harm, etc.).
People want to and have to trust others. You can’t do everything–fix you own car & your own plumbing, create everything you need from scratch etc. People get busy doing whatever they do best. Then they think “I don’t have the time or the interest to bother with the stock market. So I’d do best to let some investing genius handle my investments for me– somebody like Ackman.”
If you’re willing to put your faith in the hedge fund to begin with, one could certainly make the argument that they only want long term investors, not speculators or weak hands that will redeem at the drop of a hat. While I understand your point about that being a downside from an individual investor standpoint, I think you could take a different viewpoint and say everyone else in the fund is also restricted like I am, so I am less likely to be adversely affected by other weak hands.
Very similar to the argument that public companies will often neglect the best long term decisions in favor of beating the street’s expectations for this quarter. Sometimes the best long term decision means taking the hit short term.
It may take them two years, but investors will retrieve their cash. By then, Pershing will consist of pretty much only VRX.
My BIS
still
+
90.98%
I hope it turns out better for Ackman. Painful to watch.
Don’t be soft, some people get what they deserve.
His hubris has been met with a heaping spoonful of humility.