Bill Ackman's Q3 Investor Letter
The focus of the recently released quarterly investor letter by Bill Ackman's Pershing Square seeks not so much to explain why the fund has a negative return YTD, but to justify why the Fund's approach to "intrinsic value" is right, and the market, well, not so much, as well as the show why even if he continues to be wrong he won't have to dump losers. Supposedly this is the kind of the thing that LPs like hearing these days. The one line that sticks out like a sort thumb in this valiant effort to explain the lack of alpha is the following: "It is largely a function of Pershing Square’s growing influence in the capital markets, our experience with previous investments, and specific circumstances with each of our holdings." That's great, and a false belief in one's market moving "economy of scale" works great, until it doesn't. Just ask Bill Milller. Also we wonder: where have all those "HF hotel" idea dinners that used to generate so much faux alpha for the Ackman-Einhorn-Loeb trio, gone? In fact, the hubris of mistaking beta participation for alpha creation is often the ast mistake many hedge funds make just before they can't make any more mistakes. That aside, in the letter Ackman explains away his thesis (again) on JCP, Fortune Brands, Family Dollar, GGP (no longer the sterling poster child of the REIT renaissance), Citi and lastly his recent(ly leaked) investment in the Canadian Pacific Railway. All we can say is that we hope Ackman is better hedged for the coming retail downturn than he was back in 2008.