Billionaire investor Bill Ackman, who forged his reputation as a vocal corporate agitator, now plans to work mainly behind the scenes with management and adopt a ‘quieter approach’ to force through change.
Having delivered three years of strong double digit returns, the famed US hedge fund manager has informed investors that as corporate America already knows who he is, there is no need for Pershing Square to resort to the ‘noisiest’ form of activism, namely activist short selling, which Ackman previously delved into at nutrition company Herbalife.
PERSHING SQUARE 3.0
‘Fortunately for all of us, and as importantly for our reputation as a supportive constructive owner, we have permanently retired from this line of work,’ explained Ackman in Pershing Square Holdings’ 2021 annual report.
Ackman wrote that his New York-based firm has ‘built a reputation as a constructive, long-term, and helpful owner. The world of large capitalisation public companies is small, and our reputation as a thoughtful investor has therefore become well known among CEOs, boards, and others who matter.
‘The result is that all of our interactions with companies over the last five years have been cordial, constructive and productive. We intend to keep it that way as it makes our job easier and more fun, and our quality of life better. So, if it is helpful to call this quieter approach Pershing Square 3.0, let it hereby be so anointed.’
In years gone by, Ackman has fought noisy proxy contests at Target and Automatic Data Processing among others and pushed for change at the likes of JC Penney, Air Products and Chemicals and Chipotle Mexican Grill.
However, recent investments in the likes of Netflix, Universal Music and Canadian Pacific have been more supportive.
RESILIENT PORTFOLIO
Ackman continues to flourish by making concentrated investments in quality large cap North American companies. Pershing Square Holdings delivered another strong year in 2021 driven by new investments, existing portfolio holdings and a hedging strategy which helped to protect investors from the potential risks of inflation whilst also ‘positioning PSH’s portfolio to generate long-term returns in the future’, according to chairman Anne Farlow.
Addressing the tragedy in Ukraine, Ackman said: ‘Watching innocent people die due to the political and geopolitical objectives of one man is something one would hope would have never reoccurred.’
He also warned the economic implications of the war are significant in amplifying inflation in energy, agriculture, and other goods and services, and tempering the risk appetites of investors and corporations.
Nevertheless, Ackman stressed ‘the industries and businesses in which we have invested are highly attractive and well positioned to withstand negative externalities’.
Pershing Square Holdings has exposure to music and video streaming through Universal Music and Netflix, restaurants through Chipotle, Restaurant Brands and Domino’s and home improvement retailing via Lowe’s, while other positions include real estate outfit Howard Hughes, hotels giant Hilton and railroad Canadian Pacific.
‘We expect that each of these companies will grow their revenues and profitability over the long term, regardless of recent events and the various other challenges that the world will face over the short, intermediate, and long-term’, assured Ackman.
At £29.95, shares in Pershing Square Holding trade at a steep 32% discount to net asset value per share as of 29 March 2022 of £43.89, while the investment company’s year-to-date performance shows a modest positive gain of 0.5%.
