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Bill Ackman has sold a 10 per cent stake in Pershing Square in a deal that values the hedge fund at just over $10bn ahead of a possible initial public offering next year.
A group of investment firms and family offices, including San Francisco-based Iconiq Capital and Israeli insurance company Menora Mivtachim, have paid $1.05bn for the stake, Pershing Square said on Monday.
The sale is expected to be followed by an IPO that would make Pershing Square the first major hedge fund to go public in more than a decade and potentially add billions of dollars to Ackman’s fortune.
Ackman has sought to capitalise on his newly established profile on social media site X and his growing role as a political commentator, particularly among conservative groups.
Earlier this year, the billionaire investor announced the launch of a closed-end fund in the US after he failed in an attempt to move an existing fund, listed in London and Amsterdam, to New York.
Pershing Square will put some of the proceeds from the stake sale towards setting up Pershing Square USA later this year, with the remainder deployed to finance future fund launches.
“This new investment will help accelerate our growth in assets under management in existing and new strategies,” Ackman said in a statement.
The stake sale hands Pershing Square a lofty valuation compared with those given to private equity groups, such as TPG and CVC Capital Partners, that have gone public in recent years.
Pershing Square’s principal business is the management of a closed-end fund that manages more than $15bn of assets and pays Pershing Square a 1.5 per cent management fee on those assets. It also earns a performance fee under certain conditions.
The fund generated about $155mn in management fees for the hedge fund in 2023 and a performance fee of $312mn, according to securities filings.
By contrast, TPG, which listed in early 2022 at a roughly $10bn valuation, generated more than $600mn in management fees in the year before its IPO. CVC had a €15bn valuation when it listed earlier this year with almost €1bn in management fees in 2023. The two groups also generated hundreds of millions of dollars in performance fees in those years.
While a group of investors and family offices are buying a minority stake in Pershing Square, funds dedicated to buying such minority stakes in investment companies, like Dyal Capital Partners or Blackstone, are not participating.
Pershing Square’s path to an IPO began more than a decade ago when Ackman created the publicly listed closed-end fund, called Pershing Square Holdings. In the years that followed, the vehicle raised billions of dollars in capital, while investors redeemed most of their money from Ackman’s private funds.
Following a spell of poor performance between 2015 and 2018 after ill-fated bets on Valeant and Herbalife, the fund ended up accounting for a vast majority of the assets Ackman managed.
Its value has soared since the pandemic after a hedge that the market would crash generated a multibillion-dollar windfall. That allowed Ackman to plough more money into strong performers in his investment portfolio, such as hotels group Hilton Worldwide, boosting overall assets and fees.
The ambitions to list a similar closed-end fund in the US should boost the assets — and potentially fees — Pershing Square manages ahead of a possible IPO.
As part of the stake sale, Pershing Square is creating an independent board of directors.