Thursday, April 28, 2011

A Profile of the Hedge Hog Bill Ackman - The Busybody of the Beresford

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For those of you who follow the hedge fund world, you will know of one of the younger breed of gurus Bill Ackman, who is a regular on the CNBC circuit.  The New York Observer has a pretty in depth piece on him, touching on his major investments but also from a personal perspective - interesting to hear about where these success stories came from, and what they do in their free time (Ackman plays tennis with Andre Agassi and George Soros).  Like many of the top dogs in the industry, Ackman is super competitive in every part of his life. 

In this story in 2008 we learned that Ackman was one of those encouraging Goldman Sachs to restore confidence by getting a cash infusion from Warren Buffet.  He also made one of the best investments of the past few decades, by investing into General Growth Properties.
  • His most successful investment to date may be the purchase of General Growth Properties, the mall operator. Mr. Ackman bought at 34 cents a share and led it through bankruptcy, and now it trades in the mid-teens.
  • Since launching Pershing Square, Mr. Ackman has turned a $54 million initial investment into a $9.3 billion behemoth, according to his March report—conveniently leaked, as it always does, on the rambunctious Wall Street gossip site Dealbreaker.
  • "I want to have one of the great investment records of all time, why not?" Bill Ackman, founder of hedge fund Pershing Square Capital Management said nonchalantly over breakfast one Saturday in early April.  "That's why I have to be healthy," Mr. Ackman continued. "It's not just compounding a high rate; it's living a long time. Buffett has a 55-year-old record. I've got a seven-and-a-half-year-old record. It's going to be 90-I'll be almost 90 by the time I've got a 50-year history." He paused to refine the math. "I'll be 87." (He could shave a few more years off since Pershing is currently returning 24 percent annually compared to the 22 percent of Warren Buffet's storied Berkshire Hathaway.)
  • While he prefers to see his seven-year-old fund in the same positive light as many people view the work of Mr. Buffet, comparisons are more often made to Mr. Icahn. Both he and Mr. Ackman are known for their activist investing, taking huge stakes in the bluest of blue-chip companies and then agitating for changes they believe will improve the stock price. Mr. Ackman, who considers his work as benevolent and beneficial—not just to the companies but also to the entire country—hates the comparison to the notorious corporate raider.
  • LIKE A HANDFUL of other hedge fund managers, Mr. Ackman's profile exploded at a time when pretty much everything else around him was imploding.  It all began in 2002, when he had made a now-notorious bet against gargantuan muni-bond insurer MBIA. Before that, there had been the occasional headline-grabbing deal, such as when he tried to separately team up with Donald Trump and Jerry Speyer to buy Rockefeller Center from the Japanese in the late 1990s, or when he led the first successful hostile takeover of a real estate investment trust, Cleveland's First Union. But it was not until he got a tip that the federally backed agricultural insurer Farmer Mac was grossly overleveraged that he would hit upon the investment strategy that serves him to this day.
  • Like its bigger siblings, Fannie and Freddie, Farmer Mac had hordes of unregulated, risky loans sitting on its books, just waiting to default. At the time, though, it had "buy" or "strong buy" recommendations from a number of major banks, another counterintuitive investment for the combative Mr. Ackman. Gotham Partners took a huge short position in the company, then released a report titled "Buying the Farm."  In the meantime, Mr. Ackman reached out to a reporter at The Times, Alison Leigh Cowan, whose brother was a business school classmate of his. When the gambit worked—some said thanks to Ms. Cowan's reports—it made the fund $75 million and sent Mr. Ackman looking for another company to pursue. 
[Jan 13, 2009: Logic Behind Bill Ackman's Purchase of General Growth Properties]
[Jul 15, 2009: Bill Ackman Offers a Solution to Fannie/Freddie Mess

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