Bill Ackman, the prominent hedge fund manager, is embarking on a new venture by aiming to raise a substantial $25 billion from investors for a US closed-end fund through Pershing Square USA Ltd.’s planned initial public offering. This move comes despite the challenging landscape faced by the sector in recent years.
Known for his long and arduous activist campaigns, Ackman is no stranger to uphill battles. In a bid to attract investors, he plans to utilize his extensive social media following of 1.3 million on X (formerly Twitter) to communicate his investment ideas, as revealed by sources familiar with the matter.
The fund’s investor base is expected to comprise primarily institutional investors, with some retail interest, according to insiders. The ambitious goal of raising $25 billion surpasses the $19 billion in assets under management of Ackman’s hedge fund. Such a sizable fund would empower Pershing Square to acquire larger stakes in publicly listed companies, thereby enhancing its influence in the market.
John Cole Scott, president of CEF Advisors, expressed skepticism about the feasibility of raising $25 billion but acknowledged Ackman’s confidence and substantial resources. He noted that this fundraising endeavor represents uncharted territory in the US market.
To achieve this unprecedented fundraising target, Ackman must address concerns surrounding the closed-end fund sector. These funds, which consist of income-generating assets like junk bonds and debt, have often traded at significant discounts to their net asset value, particularly amidst rising interest rates.
Even Ackman’s $10 billion European-listed vehicle faces a substantial 23% discount to its net asset value, underscoring the challenges inherent in the sector. Data compiled by Bloomberg indicates that approximately three-quarters of all closed-end funds trade at a discount in a given month, according to the Investment Company Institute.
Activists have increasingly targeted closed-end funds to close the valuation gap through tender offers. Currently, there are 58 activist campaigns in the US against managers in the sector, as highlighted by Bloomberg data. Despite this, the launch of new closed-end funds has been relatively scarce, with only around 40 new funds introduced since 2019.
Unlike many closed-end funds, Pershing Square USA possesses a unique marketing advantage in the form of Bill Ackman’s public persona. Leveraging his reputation as a high-profile figure in the financial world, Ackman aims to navigate the challenges of the sector and attract substantial investments for his latest venture.
