Pershing Square Holdings Ltd., (PSHZF), the publicly traded security of Bill Ackman’s activist hedge fund, recently disclosed that the fund was down 3% for the month of June (before accounting for fees), bring its year-to-date 2016 performance down to 20%. This compares with a 2.18% rise in the S&P 500 (SPX) index.
Ackman Desperate for a Victory
And according to The Wall Street Journal's David Benoit, Ackman recently fired eight lower-level staffers of Pershing Square. Benoit, citing people familiar with the matter, noted that the cuts involve mostly of back-office workers, which amounts about 10% Pershing Square's staff.
Although the hedge fund has suffered losses, mostly due to its large ownership stake in Valeant Pharmaceuticals International, Inc. (VRX), the Journal notes that the layoffs were not tied to performance. The fund, instead, is seeking to automate back-office tasks like filling out investor forms. A Pershing Square spokesman declined to comment to the Journal.
Pershing Square, which owned roughly 9% Valeant, ranks as top-three shareholder in the Canadian company. Despite the company's struggles, including some $31 billion in debt, which has lead to 80% year-to-date decline in share price, Ackman has said he expects the investment to rebound. Ackman and Stephen Fraidin, Pershing Vice Chairman, recently obtained board seats on Valeant, hoping to spur its makeover, which has included the appointment of former Perrigo Company plc (PRGO) CEO Joseph Papa as new CEO.
Meanwhile, Ackman's short position on nutrition products distributor Herbalife Ltd. (HLF) has yet to pan out. Herbalife shares are up almost 9% year to date, including almost 5% gains over the past year. Add in Pershing's other major long stakes, including Canadian Pacific Railway Limited (CP) and Platform Specialty Products Corporation (PAH), which declined roughly 9% and 11%, respectively, in June, Ackman is likely desperate for a win.
The Bottom Line
Pershing Square's assets under management, which reached $20.2 billion at its peak last July, have dropped significantly to about $12 billion in May. Its structure, however, has helped the firm retain assets by preventing a run on its reserves during rough times. This is because outside investors can pull only one-eighth of their capital each quarter. But with continued poor performance declines, Ackman might have to consider other tasks to automate.