Bloomberg News

Ackman May Sell Shares in Hedge Fund in 2012 for Stable Capital

October 05, 2011

Oct. 5 (Bloomberg) -- Bill Ackman, the money manager known for investing in companies to press for changes, said he may sell shares in a hedge fund to secure more permanent capital for investments as soon as next year.

Ackman, founder of New York-based Pershing Square Capital Management LP, told an audience late yesterday at the Harmonie Club in New York that he plans to sell shares in a closed-end fund, which trades on an exchange.

“We will pick our moment, probably sometime in 2012,” Ackman said.

By selling shares in a listed fund, Ackman is trying to avoid a repeat of 2009, when investors redeemed about 27 percent of the firm’s capital. The redemptions made it harder for him to take advantage of opportunities created by the global financial crisis, he said in an hourlong interview. Pershing Square itself would not be going public.

Brevan Howard Asset Management LLP in London and Third Point LLC in New York are among the hedge funds that have sold shares in individual funds to the public. Such listings mean hedge funds don’t have to worry about investors pulling cash through redemptions.

Closed-end funds raise capital by selling a set amount of shares through an initial public offering, then trade on an exchange like a stock. The price can fluctuate above or below the value of the underlying holdings.

Brevan, Third Point

Brevan Howard, run by Alan Howard, raised about $1 billion in March 2007 with an IPO in BH Macro Ltd., the first listing of an individual hedge fund on the London Stock Exchange. Third Point, run by Daniel Loeb, four months later raised $525 million, or about 24 percent less than its target, in a share sale for one of its funds on the London bourse.

Ackman, 45, invests in companies he deems undervalued and then urges changes he says will increase shareholder returns. In the past year, he has bought stakes greater than 10 percent in Fortune Brands Inc., the maker of Jim Beam bourbon now known as Beam Inc. after a spinoff, and J.C. Penney Co., the third- largest department store chain in the U.S.

Ackman, who owned about 0.8 percent of Citigroup Inc. at the end of June, according to a regulatory filing, said bank stocks are interesting at current prices.

“The prices assume financial Armageddon,” he said.

Citigroup, based in New York, tumbled 48 percent this year through yesterday. Charlotte, North Carolina-based Bank of America Corp. dropped 57 percent and New York-based JPMorgan Chase & Co. fell 29 percent.

--Editors: Josh Friedman, Andreea Papuc

To contact the reporters on this story: Katherine Burton in New York at kburton@bloomberg.net; Erik Schatzker in New York at eschatzker@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net


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