Pershing Square Capital Management Fund Overview and Philosophy

Pershing Square Capital Management is a hedge fund management company founded by Bill Ackman in 2004.

The company's flagship fund is the Pershing Square Holdings, Ltd. fund, which was launched in 2013.

Pershing Square Capital Management is known for its activist approach, where the company takes an active role in influencing the companies it invests in.

The company's investment strategy focuses on long-term value creation through active ownership and engagement with the management teams of its portfolio companies.

Bill Ackman, the founder and CEO of Pershing Square Capital Management, has a proven track record of successful activism, with notable successes including his investment in Canadian Pacific Railway.

Pershing Square Tontine Holdings was a blank check company formed by Bill Ackman that went public on July 22, 2020, at a value of $4 billion.

The company had a unique "Tontine" structure, which incentivized shareholders to hold shares through merger once a target was found for acquisition.

PSTH had 200 million units in its IPO, including 200 million shares and 22,222,222 warrants.

Another 44,444,444 warrants were distributed to shareholders who chose to participate in the proposed merger.

The strike price of PSTH warrants was $23.

In July 2022, Bill Ackman addressed PSTH shareholders, stating he would return the funds of the SPAC as he was "unable to consummate a transaction that both meets our investment criteria and is executable."

Pershing Square Capital Management's investment strategy is centered around finding solid companies with large growth potential. They focus on minority stakes in publicly traded companies.

Ackman, the firm's leader, considers Warren Buffet a mentor and has adopted a similar approach. He looks for a limited number of attractive investments, typically eight to 12 core investments.

The firm's investment strategy is flexible, with no restrictions on the securities or other financial instruments used.

PSCM acquired a 7.1% stake of Universal Music Group (UMG) from Vivendi in August 2021 for $2.8 billion.

This significant investment marked a major milestone in PSCM's growth strategy.

Later that month, PSCM agreed to purchase an additional 2.9% of UMG from Vivendi for $1.149 billion.

Ackman was nominated to a non-independent director of UMG in March 2022, following the transaction.

PSCM held 10% of UMG's share capital after the transaction.

In January 2022, Pershing Square acquired a $1.1 billion stake in Netflix.

Ackman's investment in Netflix was made after the company's stock had a 30% selloff due to a disappointing subscriber growth outlook for Q1 2022.

He praised Netflix's "best-in-class management team" in a letter to investors, expressing admiration for CEO Reed Hastings and the company he had built.

Netflix stock fell by 35% in April, prompting Ackman to sell his entire stake in the company.

This decision resulted in Pershing Square losing over $430 million over the three-month investment.

The high-yield market is seeing a surge in new money deals, with a senior leveraged finance banker noting that good engagement is being seen across new deals.

Proper new supply is still low, which is working in favor of new issues, allowing them to be refinanced and issued.

The headline trade of the week was Zegona's €3.4bn-equivalent dual-format deal refinancing of its acquisition of Vodafone Spain, which included €1.3bn and US$900m of senior secured notes alongside term loan Bs.

Pershing Square Capital Management offers a range of services, primarily focused on managing hedge funds, with two private funds and one public fund. The firm's private funds, Pershing Square, L.P. and Pershing Square International, Ltd., have the same strategies and objectives as the public fund, Pershing Square Holdings, Ltd.

The firm is not actively seeking new investors for its two private funds. At times, Pershing Square Capital Management may provide investment advisory or management services to other funds or products.

Pershing Square Capital Management's investing philosophy is centered around seeking solid companies with large growth potential. Ackman, the firm's leader, looks to invest in typically eight to 12 core investments.

He focuses on minority stakes in publicly traded companies, as he believes this approach provides a better opportunity to deliver superior risk-adjusted returns. The firm generally sets no restrictions on the securities or other financial instruments it uses.

This approach is rooted in Ackman's mentorship under Warren Buffett, who also prioritizes investing in solid companies with growth potential. The firm's Form ADV brochure notes that investing in a limited number of attractive investments about which it has detailed knowledge is more effective than a large diversified portfolio.

Pershing Square Capital Management charges a management fee of 1.5% annually for its core funds, which is deducted from the assets under management.

This fee is in addition to a performance-based fee, which starts at 20% of the increase in net asset value after deducting management fees and other losses.

The firm may negotiate fees at its discretion and they can vary by product or service, so it's essential to review the specific terms of any investment.

Pershing Square Capital bases its management fees on a percentage of assets under management, typically 1.5% annually for core funds.

These fees are in addition to a performance-based fee, which starts at 20% of the increase in net asset value after deducting management fees and other losses.

The firm may negotiate fees at its discretion and they can vary by product or service.

Pershing Square Capital has a history of SEC disclosures, including a $75,000 civil penalty for a $500 personal contribution to a political campaign in 2017.

The firm didn't immediately notify the parent company of a Brazilian shopping mall development company about its 13.9% stake purchase in 2010, which led to a $49,000 fine.

SEC rules require immediate disclosure of significant purchases, as seen in the Brazilian case. This highlights the importance of timely reporting to avoid fines and penalties.

The $500 personal contribution to a political campaign was returned and the firm consented to a cease and desist order and a censure in 2017.

Pershing Square Capital Management has been making headlines in the financial world.

Bill Ackman, the founder and CEO of Pershing Square, has a reputation for taking bold bets on companies he believes have untapped potential.

In 2012, Pershing Square launched a public campaign to replace the CEO of Herbalife, a nutrition and weight loss company.

Pershing Square Capital Management has a diverse portfolio of investments, including consumer goods, retail, and pharmaceuticals.

Pershing Square's investment ventures have made their way into popular culture through two financial documentaries.

The documentary "Betting on Zero" features Bill Ackman's economic activism in a positive light, highlighting the costly lengths to which the fund went in trying to prove Herbalife Nutrition was a pyramid scheme.

Pershing Square's involvement in the Valeant scandal is also explored in the documentary "Dirty Money", with a more doubtful tone.

The episode "Drug Short" specifically shines a light on Ackman's decision to double down on the fund's Valeant investments until the departure of former CEO Mike Pearson.

Here are some notable mentions of Pershing Square in popular culture:

Bill Ackman is known for pushing the boundaries of capital markets innovation. He's not one to listen to investment banking advisers, and that's led to some pretty creative ideas.

Ackman raised a record US$4bn from an IPO of Pershing Square Tontine SPAC in 2020. This blank-cheque company used a tontine structure to incentivize investors to stay invested after a merger.

Pershing Square Tontine's agreement to purchase a 10% stake in Universal Music was scrapped due to a lawsuit. Instead, Pershing Square Capital purchased the stake directly.

Ackman's Pershing Square SPARC is another innovation in the works. Like a SPAC, SPARC targets a merger, but gives investors the right to commit capital rather than making that commitment upfront.