After three straight years of losses at Pershing Square in the aftermath of the Valeant fiasco and Herbalife short squeeze which cost the hedge fund a -20.5% loss in 2015, -13.5% in 2016 and a -4% drop in 2017 (it is however up 0.2% YTD in 2018), it is time for drastic changes, and as Reuters reports, Bill Ackman – one of the worst performing managers in the past three years – is firing almost 18% of Pershing Square staff and “looking to lower his public profile” as he seeks to turn around his foundering hedge fund which appears to have finally been hit with redemption requests.
The billionaire (?) hedge fund manager will “spend more time investing and stop being the firm’s No. 1 marketer” Reuters reported citing people familiar. As a first step in this “turnaround”, Ackman will lay off 10 people, shrinking the firm to 46 employees from 56, to oversee the roughly $9 billion in AUM it has left. That is roughly half the assets Ackman managed at Pershing Square’s peak in 2015 around the time he was allegedly colluding to take over Allergan.
While most of the (initial) RIF involves back-office employees, one investment team member is also leaving. Expect more to follow.
The best part however is the following: “Ackman also plans to go silent, at least for awhile, the people said, a major change in style for one of Wall Street’s most voluble investors.“
Which, supposedly means an end to Ackman’s unique brand of activism.
Reuters also notes that Ackman plans to curtail all of his own marketing and public relations meetings associated with running a big hedge fund, which is understandable as the only PR people left at Pershing Square are those who have to deal with redemption requests.
So as Ben Hakim, a partner who joined Pershing Square in 2012, does the traveling and interfacing with clients, what will Ackman do? He “will stay in the office, concentrating on financial analysis.“
The news leaks just days ahead of the firm’s annual client dinner on Thursday at the New York Public Library, where Ackman planned to announce the personnel changes and new direction.
That dinner, and another similar event in London, will become the once-a-year chance for pension funds, endowments and wealthy investors to see and hear Ackman discuss performance and lay out his strategy, the people said. This time, Ackman will detail how his private funds lost between 1.6 percent and 3.2 percent in 2017.
Unfortunately for those who will go to the Library to meet with Ackman in hopes of giving him money to manage (as opposed to their redemption requests), they will be out of luck:
New clients often demand an audience with the boss, but Ackman has told people he is putting an end to that practice. He still plans to communicate with investors through letters and quarterly calls, and occasionally make public statements about investments.
What is the fundamental driver behind the overhaul? Why nostalgia for a much better time of course. “In making the changes, Ackman wants the firm to operate more as it did in 2012, when he won a big proxy contest at Canadian Pacific, people familiar with the matter said.” Pershing Square then employed 46 people and managed $11 billion. The firm’s staff peaked at 70 people in 2016.
Now if only firing a fifth of your firm was enough to propel it back to its historical fame, Ackman’s plan just might work…
Some more details:
David Klafter, a senior lawyer at the firm, will join the investment team to handle legal matters associated with the firm’s bets, which usually total only about a dozen.
Pershing Square’s investment team has historically had between eight and 10 members and will stay at its current size of 10 people, the people said.
But the biggest indignity was saved for last: according to Reuters, “Ackman also laid off his driver, saying he can walk or take the subway to his Midtown Manhattan office.”
Or just take the bike.
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