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Pershing Square Capital Management Review

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Pershing Square Capital Management, L.P.

Hedge fund management company Pershing Square Capital Management is probably most known for its founder, activist investor Bill Ackman, and his controversial positions in such companies as Herbalife and Wendy’s. The firm currently oversees four funds that have a combined value of more than $9.6 billion, down from its $20 billion peak in 2015

Investors in these funds may include high-net-worth individuals, pension funds, profit-sharing plans, trusts, estates, charitable organizations, corporations, business entities, endowments and foreign sovereign wealth funds. Of these investors, 75% are not American, according to SEC data.

Pershing Square Capital Management Background

Bill Ackman founded the firm in 2004 with $54 million of his and former business partner Leucadia National’s money. In its first 10 years, the New York firm delivered $11.6 billion in gains. Today, it employs 38 people, including 10 advisors. Now a billionaire, according to Forbes, Ackman is the majority owner. 

Recently, Ackman and Pershing Square Capital were in the news for his nearly billion-dollar bet against Herbalife. It involved a very public fight with investor Carl Icahn, and the investment is said to have hurt the firm’s reputation and lost its investors millions. Indeed, after what Ackman has called a “rough patch” of underperformance and investor redemptions, the firm’s assets under management (AUM) are down roughly $10 billion or 50% from its peak.

What Types of Clients Does Pershing Square Management Accept?

As mentioned earlier, the firm describes its investors as high-net-worth individuals, pension funds, profit-sharing plans, trusts, estates, charitable organizations, corporations, business entities, endowments and foreign sovereign wealth funds. That said, one of its funds, Pershing Square Holdings (ticker: PSHZF) is a public fund, whose shares can be bought over the counter from a broker-dealer

Pershing Square Capital Management Minimum Account Sizes

Pershing Square Capital provides its minimum subscriptions in each private fund’s offering documents. According to SEC data, they range from $1 million to $5 million. The firm may waive or change the minimum at its discretion. 

Services Offered by Pershing Square Capital Management

As mentioned earlier, Pershing Square Capital manages funds - three private funds and one public fund. Private funds Pershing Square, L.P. and Pershing Square International, Ltd. generally have the same strategies and objectives as Pershing Square Holdings, Ltd., the public fund. All three invest in the remaining private fund, which is actually three different partnerships and are collectively called here the Pershing Square VI funds (PSVI). PSVI funds, in turn, primarily invest in securities of (or seek to be exposed to the value of securities issued by) Automatic Data Processing, Inc. 

The PSVI funds are not open to new investors, and the firm is not actively seeking new investors for the other two private funds. Public fund Pershing Square Holdings holds approximately 75% of the firm’s AUM.

At times, the firm may also provide investment advisory or management services to other funds or products. 

Pershing Square Capital Management Investing Philosophy

Ackman considers Warren Buffet a mentor and accordingly looks for solid companies with large growth potential. So with Pershing Square, Pershing Square International and Pershing Square Holdings (collectively, the core funds), he seeks to invest in typically eight to 12 core investments - specifically, minority stakes in publicly traded companies. He does this because he believes, as stated in the firm’s Form ADV brochure:

  • “There are a limited number of attractive investments available in the marketplace at any one time. 
  • “Investing in a relatively modest number of attractive investments about which it has detailed knowledge provides a better opportunity to deliver superior risk-adjusted returns when compared with a large diversified portfolio of investments it can know less well.” 

The firm generally sets no restrictions on the securities or other financial instruments it uses. It also does not follow any set asset allocation model.  

Fees Under Pershing Square Capital Management

Pershing Square Capital bases its management fees on a percentage of AUM. Generally, the percentage is 1.5% annually for the core funds. On top of that, the firm collects a performance-based fee, which generally starts at 20% of the increase in net asset value (after the management fee and other losses have been deducted). The PSVI funds carry an annual management fee of 0.25% of AUM plus a performance-based fee. The firm may negotiate any fees at its discretion. 

Pershing Square Capital Management Awards and Recognition

LCH Investments named Ackman to its list of top 20 hedge fund managers for 2014. He ranked No. 19 for a year that saw $4.5 billion in net gains.

What to Watch Out For

Pershing Square Capital does not work with small investors. It also does not provide financial planning or wealth management services. So if you are looking for a financial advisor who can help steer your personal finances, this firm is probably not right fit.

Disclosures

In its most recent SEC filings, Pershing Square Capital reported that it had two disclosures within the past 10 years. The most recent one (resolved in January 2017) involved an employee’s $500 personal contribution to a political campaign that was in violation of SEC rules. The contribution was returned and the firm, without admitting to the allegations, consented to a cease and desist order and paid a $75,000 civil penalty.  

The other disclosure goes back to 2010, when the firm bought a 13.9% stake in a Brazilian shopping mall development company and did not immediately notify the parent company that was preparing for an IPO, which is required by the Brazilian SEC. Pershing Square Capital sent a formal letter a little more than a month after its purchase. Without admitting to a violation, which the Brazilian SEC never determined, the firm agreed to pay a $49,000 fine. 

Opening an Account With Pershing Square Capital Management

To contact Pershing Square Capital, call (212) 813-3700. To find out more about Pershing Square Holdings, email IR-PershingSquareHoldings@camarco.co.uk.

Where Is Pershing Square Capital Management Located?

Pershing Square Capital has two addresses on record, both in Midtown New York. They are:

  • 888 Seventh Avenue, 42nd Floor New York, New York 10019 
  • 787 Eleventh Avenue, 9th Floor, New York, NY 10019

All information was accurate as of the writing of this article. 

Tips for Rookie Investors

  • Instead of buying an OTC stock like Pershing Square Holdings, you may want to start out buying stocks that are traded on an exchange like the NYSE or NASDAQ. Listed stocks tend to have greater sales volume than OTC stocks - and you can track price movements online. 
  • Try exchange-traded funds (ETFs). These “baskets” of stocks are a good way to test the investing waters, as they trade like stocks but carry less risk, since they often track an index. What’s more, many investment companies that offer ETFs, like Vanguard and Fidelity, have cut their trading commissions, so you don’t have to pay a surcharge to buy or sell ETF shares.
  • Get expert advice for big investments. This is your money, after all. To start your search for a financial advisor, use SmartAsset’s SmartAdvisor matching tool. Simply answer questions about your financial situation and preferences, and the program will match you with up to three suitable advisors.

How Many Years $1 Million Lasts in Retirement

SmartAsset's interactive map highlights places where $1 million will last the longest in retirement. Zoom between states and the national map to see the top spots in each region. Also, scroll over any city to learn about cost of living in retirement there.

Least
Most
Rank City Housing Expenses Food Expenses Healthcare Expenses Utilities Expenses Transportation Expenses

Methodology SmartAsset calculated the average cost of living for retirees in the largest U.S. cities. Using that calculation, we determined how many years $1 million would last in retirement in each major city.

First, we looked at data from the Bureau of Labor Statistics (BLS) on the average annual expenditures of seniors throughout the country. We then applied cost of living data from the Council for Community and Economic Research to adjust those national average spending levels based on the costs of each expense category (housing, food, healthcare, utilities, transportation and other) in each city.

We assumed the $1 million would grow at a real return (interest minus inflation) of 2%, reflecting the typical return on a conservative investment portfolio. Finally, we divided $1 million by the sum of each of those annual numbers to determine how long $1 million would last in each of the cities in our study.

Sources: Bureau of Labor Statistics (BLS), Council for Community and Economic Research