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Global hedge funds have had their ups and downs in recent years, and now, another big boss has begun to act as a "spoiler"!

Bill Ackman of Pershing Square recently announced that he would raise a closed-end fund with a total size of less than $2 billion.

But surprisingly, this medium-sized fund did not go very smoothly.

In order to save face, the company recently announced a rare preferential fee for this fund:

All business sharing bonuses are waived, and management fees for the first year are waived.

This has really stirred up a hornet's nest among my peers.

Fundraising with twists and turns

Ackman has been planning for a long time to raise funds for his company Pershing Square USA to go public.

He packaged the above-mentioned companies in the form of closed-end funds and prepared to list them on the New York Stock Exchange. He initially set the fund's IPO target at US$25 billion, equivalent to more than 180 billion yuan.

If this "dream" succeeds, it will become one of the largest IPO cases in the United States.

However, this "high-profile" fundraising did not go smoothly.

At the end of July this year, the disclosure documents submitted by Ackman to regulators showed that he had lowered the fundraising amount to US$2.5 billion to US$4 billion.

He also sent a letter to investors saying:Transaction size is highly sensitive to market reaction. Especially given the novelty of the structure and the very negative trading history of closed-end funds, it would require a considerable leap of faith on the part of investors . . . "

Then another dramatic scene happened.

Pershing Square had revealed the identities of institutional investors willing to subscribe to its IPO shares. One of the institutions decided to withdraw from the subscription after the news was revealed and declined to comment on the decision.

After significantly reducing the amount of funds raised, Ackman postponed the IPO plan again until the latest version of the prospectus was produced.

The market was surprised again.

The fundraising amount was reduced to US$2 billion, equivalent to RMB 14.5 billion.

Compared with the initial "confident" target of US$25 billion, the fund tycoon has now cut 90% of the space.

Pricing Details

On July 30, Pershing Square uploaded an announcement titled "Registration Statement of Closed-End Investment Company - Revised Version" on the website of the U.S. Securities and Exchange Commission.

(As shown above) The publicly traded entity plans to issue 40 million shares of common stock at a price of $50 per share.

The announcement disclosed that of the IPO shares, 15 million shares were sold to institutional investors and 15 million shares were sold to retail investors. In addition, fund managers subscribed to the remaining 10 million shares.

Comprehensive announcement and official information: Pershing Square Capital Management, LP serves as the manager of the above-mentioned issuer. This manager was established in December 2003.

Akman’s core hedge fund platform, Pershing Square Holdings, Ltd, is also managed by Pershing Square Capital Management.

Worth noting:The manager also promised to, will not sell, transfer or otherwise dispose of the shares subscribed in this issuance.

This is similar to the situation in China where, after a domestic fund is issued, the fund manager or fund manager follows up with the investment and guarantees not to redeem within ten years.

What exactly is a listed entity?

Reading the entire Pershing Square announcement, a key word appears many times: "closed-end", which means closed in Chinese.

Ackman controls Pershing Square USA, but this is different from a listed company in the usual sense.Expressed as a closed-end management investment company。

In effect, the listed entity is a closed-end fund.

The announcement explains what investors may be confused about and compares it with public mutual funds:

First, closed-end investment companies are different from open-end investment companies (commonly known as mutual funds). The former usually have their shares listed and traded on a stock exchange.and does not redeem its shares upon request of shareholdersIn contrast, the latter issue securities redeemable at net asset value and can be redeemed by shareholders at any time.

Second, mutual funds face continuous inflows and outflows of funds, which may complicate portfolio management.Closed-end investment companies have greater flexibility, including investments in less liquid targets.

Operational details

The relevant announcement mentioned the operational details at the investment level.

After the closed-end fund completes fundraising, it will start real investment. Here is the important information:

First, by investing in and holding 12 to 15 large-cap companies.

Second, companies in the North American market

Third, focus on growth.

Fourth, the relevant targets are predictable and free cash flow generating assets.

Fifth, companies with limited exposure to external factors, i.e., companies that are not materially negatively affected by macroeconomic factors, commodity prices, regulatory risks, interest rate fluctuations and/or cyclical risks.

The announcement mentioned that in addition to investing in minority stakes in companies with the above characteristics, investors can also hold controlling stakes in related companies.

The above content is highly similar to the investment strategy of Ackman’s Pershing Square Holdings.

Public data shows that the total assets managed by Pershing Square are US$18.7 billion, which also belongs to the closed-end fund operation structure.

The biggest highlight: no performance commission

What is extremely crucial is that Ackman's fundraising this time was lower than expected, and it made a huge "concession" in the fund fee structure.

first,This fund does not charge any performance fees, the announcement said: "This approach has the potential to significantly improve long-term net asset value (NAV) performance."

Secondly,No fixed management fee will be charged for the first 12 months after the issuance is completed, after which a management fee of 2.00%/year will be charged.

again,Disclose net worth once a week, rather than announcing net worth at the end of the month or quarterly like many hedge funds.

The above measures directly impact the "practices" of current Wall Street hedge funds.

In the future, it remains to be seen whether Ackman can achieve his fundraising goal of $2 billion.