Bill Ackman has announced plans to attempt to reshape his hedge fund business, Pershing Square, into a diversified conglomerate akin to Warren Buffett's Berkshire Hathaway. Ackman's latest proposal involves acquiring shares in Texas real estate developer Howard Hughes Holdings, aiming to turn it into a conglomerate that can compete with private equity firms and large corporations.
The acquisition would not be through Pershing's funds, but rather the investment manager's parent company, with the goal of leaving Pershing with a diversified holding company that has access to Howard Hughes' excess cash and additional resources to invest in new companies and assets. The new structure is intended to allow Pershing to pursue investment types that they had not been able to previously due to fund mandates (e.g., restrictions on control positions, private companies).
Ackman's proposal represents a shift in strategy for Pershing Square, which recently abandoned its launch of a listed closed-end fund. By creating a diversified holding company, Ackman may be attempting to position Pershing Square to compete with major private equity firms that have similar products. By falling outside the definition of an "investment company" under the Investment Company Act of 1940, these vehicles can allow a broader swath of the retail market to access the types of investments typically reserved for investors that satisfy the "qualified purchaser" standard required by most private equity funds, while allowing sponsors the flexibility and compensation structures they are used to having with their traditional, institutional-focused, private funds.
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