Ackman may struggle to raise $1 billion in less than 10 days

Wed Jul 10, 2013 3:36pm EDT
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By Svea Herbst-Bayliss

BOSTON (Reuters) - Hedge fund manager William Ackman's strong returns have made him into one of Wall Street's biggest managers, but even he may struggle to raise $1 billion in the next week for a single stock fund whose target he won't identify, say investors.

One of his clients, the Public Employees Retirement Association of New Mexico, which first invested with Ackman's Pershing Square Capital Management in 2010, has already said it will take a pass on the new special investment vehicle, unwilling to hand over so much cash for such a long time.

"We were notified of the PS (Pershing Square) special vehicle, but will not be investing as it has a longer lock-up than what we'd like," said Jason Goeller, who oversees hedge fund investments at the $13 billion pension fund.

Ackman, an activist investor whose taste for shaking up staid corporations has earned clients an average 16 percent a year over his firm's eight-year lifetime, set the $2.25 trillion hedge fund industry buzzing this week with his latest offer: a new special investment vehicle with a three-year lockup until September 30, 2016.

In a letter, seen by Reuters, he says it will pay off "if we are successful in effectuating change." He will not name the company for fear of having someone else step in front of him and he has put an usually aggressive timeframe - 10 days - on raising the $1 billion needed at a time investors are taking more not less time to finalize investment choices.

A spokeswoman for Pershing Square declined to comment.

Calling the offer "a big ask" and comparing it to writing Ackman a "blank check", a handful of industry investors speculated that many potential clients will say no just as New Mexico is doing.

"This is going to be a much tougher slog than when he raised money for the fund that invested in Target," said a person who allocates money to hedge funds but did not want to be identified as he mulls his own allocations. He was referring to one of Ackman's previous special-purpose vehicles that invested with retailer Target and had to be shut down after 90 percent of the money was lost.   Continued...

William Ackman, CEO of Pershing Square Capital Management, speaks at the Partner Connect 2013 conference, sponsored by Thomson Reuters, in Boston April 5, 2013. REUTERS/Brian Snyder