Bill Ackman's Pershing Square Holdings started trading on the Euronext Amsterdam under the symbol "PSH" on October 13. Daniel Loeb had a similar IPO in 2007 on the London Stock Exchange with his fund, Third Point Offshore (LSE:TPOU, LSE:TPOG, TPNTF). The goal of the IPO is to raise permanent capital to help the activist investor maintain his positions in target companies during times of turbulence. If too many investors have redemption requests in the hedge fund, the manager will not be able to maintain a position of control over all of the companies in the portfolio.
Pershing Square was listed on the exchange in Amsterdam because funds that have an incentive fee as part of its expense to shareholders cannot be publically listed in the United States. Typically, hedge funds will charge a flat fee plus a percentage of the profits. The fund can trade in the U.S. through the OTC market if the fund is outside of the country and trading primarily on a foreign exchange. Pershing Square Holdings, Ltd. is incorporated under the laws of Guernsey. Originally, Ackman was considering a listing on the London Stock Exchange, but it would have been listed in the Specialist Fund Market. Being listed on the Euronext Amsterdam exchange provides more liquidity. The fund is currently only available on the Amsterdam exchange, and it is uncertain as to when it will be available OTC in the U.S.
Since inception on January 1, 2004, through June 30, 2014, Pershing Square had a compounded annual gross return of 27.7 percent compared with the S&P 500's return of 7.43 percent including dividends. Ackman is able to provide these returns in one of the most well-covered markets in the world, large cap North American equities. His strategy is to find underperforming companies where he can take a large enough minority stake to influence change. His portfolio is highly concentrated with only six equity investments listed on the most recent 13F filed with the SEC. Allergan (AGN) is the largest position comprising of 38.8 percent of the equity portfolio and 9.72 percent of the shares outstanding. Ackman worked with Valeant Pharmaceuticals (VRX) to orchestrate a buyout offer for Allergan. Allergan's board of directors is refusing to consider the offer, but Ackman has a large enough position to call a special meeting with shareholders.
Two positions not listed on the most recent filing include Herbalife (HLF) put options and total return swaps in Fannie Mae (FNMA) and Freddie Mac (FMCC). In summary, Fannie Mae and Freddie Mac have to pay its profits to the government due to the previous inability of the companies to pay the full dividends on its preferred shares sold to the government during the bailout. Fannie and Freddie can now more than afford to pay the dividend, but the government is still taking all of the profits. Ackman and other large investors are battling the U.S. government in court over the issue. His stake in the companies comprises about 2.5 percent of the portfolio.
With the $2.7 billion raised from the IPO, Ackman said that the cash being raised is intended for a new target in the United States. An announcement of the investment will likely occur within the next 45-60 days. With Ackman only being 48 years old, this is a great opportunity to buy into his fund and invest for the long-term. So far this year through the end of September, his fund is up 31.5 percent, keeping pace with his historical annual re
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