Pershing Square Capital Management LP, a U.S. hedge fund run by William Ackman, is set to float a new $4-billion (U.S.) fund to boost the amount of permanent capital it has for activist bets, an investor source said.
Mr. Ackman, a high-profile activist investor busy trying to shake up the running of firms such as Canadian Pacific Railway and Burger King, plans to list the fund next January, with London the most likely venue, the source – who asked not to be named – said on Thursday.
The fund, Pershing Square Holdings, would invest across Pershing’s existing offshore hedge funds, which run $10-billion, the source added.
By launching a listed fund structure instead of holding money in offshore funds, Pershing will boost its so-called permanent capital, which is harder for investors to withdraw and popular among activist managers because it gives them a stable capital base with which to effect change at target firms.
The move could allow Mr. Ackman to make more opportunistic bets during periods of market distress, and take larger stakes in a greater number of holdings.
Last year, Mr. Ackman said in a letter that only about 8 per cent of Pershing’s capital is permanent, committed by employees and long-time affiliates.
A number of hedge funds have listed certain funds in recent years including Brevan Howard and BlueCrest, two of Europe’s largest managers in the $2-trillion industry.
Pershing is offering existing investors a 4 per cent fee discount on its usual 20-per-cent performance fee for cash they move into the new vehicle, the source said. Pershing declined to comment.
The source told Reuters the new structure was appealing because of the fee discount, and because a listed vehicle often meant smaller capital requirements for institutional clients over those required for investments in offshore funds.
Mr. Ackman has forged a reputation as one of the foremost activist investors in the U.S. in recent years, putting himself in line to succeed aging corporate raiders such as Carl Icahn.
Among Pershing’s most famous activist challenges, the hedge fund shorted shares of MBIA, once the world’s biggest bond insurer, questioning its transactions and calling for the resignation of its chief executive before a 2009 restructuring.
Pershing’s investors are set to meet with the firm in London on Monday to discuss the planned IPO, the source said.