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Bill Ackman is the legendary hedge fund manager who founded Pershing Square Capital Management in 2004, headquartered in New York. In 2014 he launched his UK based closed ended investment company, Pershing Square Holdings, a fund highly concentrated in around 8 to 12 large cap, high quality North American companies. Over the last five years the fund has returned +157% against the S&P 500 index return of +89%. The long-term track record of the US based fund has seen an annualised return of +16.5% pa compared to +10% per annum for the S&P 500**. This fund is included within EXE Capital Management’s wider “Buy List".

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There has been much discussion about the reasons for the recent volatility in stock markets, from an overpriced technology sector, highly leveraged trading in Japanese Yen and the August effect of investment managers away on holiday. In the recently released half yearly report from Pershing Square Holdings, Bill Ackman plants the blame firmly at the door of the rise in passive investment and, in particular, the impact that highly leveraged investors can have on the market. These “short term” investors have little tolerance when companies disappoint. It causes them to become forced sellers which in turn can create significant volatility in the market.

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But, he goes on to reiterate that such volatility is the long-term friend of the active manager who seeks to identify high quality companies at fair prices. Pershing Square Holdings is one company that has long been a beneficiary of market overreactions to short term bad news, as they can drive business valuations to well below their long-term intrinsic value thereby creating buying opportunities.

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If this fund is of interest do contact Bertie Scott-Hopkins to discuss whether this is appropriate for your portfolio.

* FE Analytics to 21/08/2024 Total return.

** Dividend reinvested, adjusted for UK Sterling 01/01/2004 to 19/03/2024

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The views are those of the author only. The above does not constitute a recommendation to buy the fund and advice should be sought from your financial advisor as to the appropriateness of this fund in your portfolio. Past performance is not an indication of future returns. The value of investments can fall as well as rise.

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