Invest Like A Billionaire: Accessing Bill Ackman's Strategies

Bill Ackman is the founder of Pershing Square Capital Management, a hedge fund management company. The firm manages three funds with billions of dollars in assets and its client base is made up of high-net-worth individuals, pension funds, trusts, and more. Pershing Square Capital Management offers two private funds and one public fund, with the latter being Pershing Square Holdings, whose shares can be bought over the counter from a broker-dealer. As such, one way to invest in Bill Ackman's fund is to buy shares of Pershing Square Holdings over the counter.

Pershing Square Holdings

PSH's objective is to maximize its long-term compound annual growth rate in intrinsic value per share. To achieve this, the company typically allocates the majority of its portfolio to 8 to 12 core holdings, usually comprising liquid, large-cap North American companies. Pershing Square Capital Management, founded by William (Bill) A. Ackman, serves as the investment manager for PSH and is responsible for investing the company's assets and liabilities in alignment with its investment policy.

PSH's investment strategy focuses on high-quality businesses with limited downside risks and predictable, recurring cash flows. The investment manager may also catalyze managerial, operational, and governance changes to create substantial, enduring, and long-term shareholder value. Additionally, hedging strategies are employed to mitigate market-related risks or exploit asymmetric profit opportunities.

To learn more about Pershing Square Holdings or to open an account, you can contact Pershing Square Capital Management at (212) 813-3700 or send an email to [email protected] for inquiries related to Pershing Square Holdings.

PSTH stock

PSTH is the stock symbol for Pershing Square Tontine Holdings, a special purpose acquisition company (SPAC) run by Bill Ackman. A SPAC is an alternative way of taking companies public, and PSTH stock represents one way to bet on Ackman's decision-making.

Pershing Square Tontine Holdings debuted at $20 per share, higher than the majority of SPACs, which have a base price of $10 per unit. As of July 2022, Ackman was returning the $4 billion held in trust by Pershing Square Tontine Holdings to shareholders.

In addition to PSTH, there is another way to invest in Bill Ackman's hedge fund, Pershing Square. Ackman offered a closed-end fund (CEF) to the public to invest in his hedge fund directly. By buying PSHZF stock, investors are entitled to ownership of a share of the overall Pershing Square hedge fund's results.

SPACs

Special Purpose Acquisition Companies (SPACs) are shell corporations listed on a stock exchange. They are designed to acquire a private company and take it public, typically within two years. SPACs have become an increasingly popular alternative way of taking companies public, with numerous SPAC stocks tripling or quadrupling in value after their launch.

Bill Ackman is one of the prominent figures in the SPAC space. In 2020, he launched a SPAC called Pershing Square Tontine Holdings (PSTH), which raised $4 billion in its IPO. PSTH was designed to buy an individual company, with rumours circulating that Ackman was interested in media giant Bloomberg or other financial properties. However, Ackman was unable to find a suitable target company and returned the money to investors.

In 2023, Ackman proposed a new SPAC structure called a SPARC (Special Purpose Acquisition Rights Company). SPARCs differ from SPACs in that they do not require upfront money from investors. Instead, investors are given the option to opt into a deal after it has been announced. SPARCs also have a longer time horizon, with up to 10 years to complete a deal compared to the typical 2-3 years for SPACs.

Ackman's SPARC, Pershing Square SPARC Holdings, received approval from the SEC in 2023 to raise a minimum of $1.5 billion from investors for the acquisition of a private company. Pershing Square funds have pledged to put in between $250 million and $3.5 billion as an anchor investor.

CEFs

Bill Ackman, the founder of Pershing Square Capital Management, offers a CEF called Pershing Square Holdings Ltd. (OTCMKTS: PSHZF). This fund invests in the Pershing Square hedge fund, which seeks out minority stakes in eight to 12 publicly traded companies with large growth potential. As of December 31, 2020, the Pershing Square CEF had a net asset value (NAV) of more than $45 per share, meaning that each share was backed by more than $45 of stock securities and financial instruments in the Pershing Square hedge fund.

By buying PSHZF stock, investors are entitled to ownership of a share of the overall Pershing Square hedge fund's results. The price of CEFs, such as Pershing Square CEF, often deviates from the value of their underlying assets because investors cannot redeem shares at any time at NAV as they can with ETFs. As a result, the Pershing Square CEF was trading at a 20% discount to its actual assets at the time of writing.

In summary, CEFs like Pershing Square CEF offer a unique opportunity for investors to gain exposure to hedge fund investments that are typically only accessible to high-net-worth individuals. By investing in CEFs, such as Pershing Square CEF, investors can benefit from the fund's ability to invest in a wider range of assets and the potential for discounted share prices.

Netflix

Investing in Bill Ackman's fund means investing in Pershing Square Capital Management, the hedge fund management company that Ackman founded and runs.

In January 2022, Ackman disclosed that Pershing Square had acquired a $1.1 billion stake in Netflix. This was after Netflix stock had experienced a 30% sell-off following the announcement of disappointing subscriber growth. In a letter to investors, Ackman praised Netflix's "best-in-class management team" and said he long admired Netflix CEO Reed Hastings and the "remarkable company he and his team have built".

However, just three months later, in April 2022, Netflix stock fell by 35%, and Ackman responded by selling his entire stake in the company. The fund lost over $430 million over the three-month investment.

Despite this loss, there are several lessons that investors can take away from Ackman's Netflix trade:

• Accept that you will make mistakes: Even the most successful investors like Ackman get things wrong sometimes. It's important to cultivate humility and accept that you will make mistakes when actively investing.
• Know what to do when you're wrong: Successful investors either double down or sell out, depending on their rationale for the investment. It's crucial to do your homework and research before investing.
• How to survive getting things wrong: Ackman could afford a loss of $400 million, but most investors can't. It's essential to ensure that your portfolio is diverse and that you're not staking too much on any one position.

So, while investing in Bill Ackman's fund doesn't directly mean investing in Netflix, understanding Ackman's approach to investing in Netflix and his subsequent exit can provide valuable insights for investors.

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