Bill Ackman to abandon public battles for quieter investment approach
Founder of activist hedge fund Pershing Square says he intends to work behind the scenes with companies
Billionaire hedge fund manager Bill Ackman is abandoning his use of aggressive activist campaigns to publicly shame company boards and executives to bring about change and bolster share prices, he said in an annual report to investors.
Pershing Square Capital Management’s founder said on Tuesday that he planned to be a less vocal shareholder, buying large blocks of publicly traded companies and working behind the scenes with companies on any concerns or strategies.
“[A]ll of our interactions with companies over the last five years have been cordial, constructive, and productive,” Ackman said in the report. “We intend to keep it that way as it makes our job easier and more fun, and our quality of life better.”
The announcement formalises a shift in the way Ackman invests after he made his name on Wall Street running bruising campaigns against companies such as retailer JCPenney, payrolls provider ADP and Canadian Pacific Railway.
The change, which Ackman is calling “Pershing Square 3.0”, comes amid an improvement in performance from the billionaire investor as he has retreated from public fights, instead building stakes in strong-performing companies such as restaurant group Chipotle Mexican Grill, retailer Lowe’s and hotelier Hilton Worldwide.
After three years of losses between 2015 and 2017 driven by a disastrous investment in Valeant Pharmaceuticals, Pershing Square has become one of the hedge fund industry’s top performers.
In 2019 it generated a 58 per cent net return, about double the S&P 500 stock index. During pandemic-plagued 2020, Pershing Square generated a 70 per cent net return, while the firm was able to keep pace with rising markets last year, gaining 26.9 per cent.
Pershing Square’s turn in performance has come as Ackman has taken a quieter approach by focusing on companies that do not require big fixes. After exiting multi-level-marketing company Herbalife in 2018 at a loss, he also abandoned short selling — betting against companies’ share prices — and running public campaigns in search of a profit.
“[W]e have permanently retired from this line of work,” Ackman said in the annual report.
Instead, Ackman has hedged his heavy exposure to stocks in recent years by placing hedges against the broader market that have made Pershing Square billions of dollars, which it has reinvested into the market.
In 2020, at the outset of the coronavirus pandemic, Ackman bought more than $70bn in protection against credit markets that made Pershing Square $2.6bn, allowing the firm to build large stakes in Starbucks and Hilton.
A year ago, Pershing Square paid over $150mn to put on about $100bn of hedges to protect itself against rising interest rates. In January, Ackman sold the majority of those hedges for $1.2bn, using the proceeds to build a stake of more than $1bn in streaming media company Netflix.
As interest rates have since risen, it has put the value of Pershing Square’s remaining hedges at $2.1bn, or over 10 per cent of the $15bn firm’s overall assets.
As of March 22, Pershing Square’s interest rate hedges had protected the firm against a broad market drop due to plunging tech sector valuations and the war in Ukraine. The firm was down just 2.2 per cent this year, beating the S&P 500.