Despite ongoing difficulties with its special purpose acquisition company, Bill Ackman’s Pershing Square Capital managed to have another bang-up year.
Ackman’s publicly traded hedge fund, now his largest, gained 27 percent net in 2021, with a 5.7 percent rise in December, according to a report to investors. Not counting the $4 billion in the SPAC that has yet to ink a deal with a partner, Pershing Square’s total assets are now $18.48 billion. That puts the firm in striking distance of the $19 billion at which it peaked in 2015, before losses pummeled Pershing Square in the middle of the past decade.
The hedge fund has now been on a roll for three years, with its assets under management almost tripling from its nadir of $6.8 billion at the end of 2018.
Last year’s performance did not match the fund’s 58 percent net gain in 2019, nor 2020’s 70.2 percent net gain that was propelled in large part by a $2.6 billion short bet on the impact of Covid-19. Instead, the double-digit gain of 2021 was helped by a smaller interest rate hedge in the form of a swaption — a savvy bet on inflation that Ackman has been warning about publicly for several months.
In November, he told investors that the $170 million bet was worth $1 billion. At the end of June, it had become became the third biggest contributor to the portfolio’s returns, according to Pershing Square’s semi-annual financial report.
But those gains were eclipsed by the windfall Pershing Square made off the initial public offering of Universal Music Group in its partial spinoff from French conglomerate Vivendi. Ackman had intended for his SPAC, Pershing Square Tontine Holdings, to make that investment. But when the Securities and Exchange Commission torpedoed those plans, Ackman’s hedge funds took on the commitment, with a $4 billion stake that rose 40 percent on the September opening for a $1.6 billion haul.
Ackman, who has a 25 percent stake in Pershing Square Holdings, and collects incentive fees as well, made an estimated $600 million on that day.
Pershing Square’s hedge funds put $2.9 billion into the deal, and Ackman was able to raise another $1.1 billion in a new co-investment vehicle for the rest of the 10 percent stake, making Universal the biggest position for his funds.
Pershing Square’s other stakes — in companies like Lowe’s, Chipotle Mexican Grill, and Hilton Worldwide Holdings, among others — also did well last year as the market continued to roar back from its earlier Covid-induced slump.
But Ackman faces some headwinds going into 2022, mostly related to his SPAC and his plan to introduce a new vehicle called a special purpose acquisition rights company.
Last August, the Tontine SPAC was sued by a serial investor plaintiff working with two law professors. They argued Tontine violated the Investment Company Act of 1940 and said they wanted to “reform” the SPAC market. Several retail investors in Tontine have supported Ackman, who is asking for the case to be dismissed.
Meanwhile, the SPARC he hopes to launch as a reward for investors sticking with the SPAC has met some resistance from the SEC.
Ackman had hoped to get the approval from the SEC in December for the SPARC, which he says is an improvement on SPACs because investors don’t have to put up their money until an acquisition target is chosen.
Instead of either approving the security or turning it down, however, the SEC asked for more time — and more information — before making its decision. The regulator said that it is worried about the new security’s potential for manipulation and is asking for more details from the New York Stock Exchange on how those concerns will be addressed.
