Unlock the Editor’s Digest for free with this weekly newsletter curated by Roula Khalaf, the Editor of the Financial Times. In this issue, the writer explores the rare move of billionaire Bill Ackman to take his firm, Pershing Square, public next year in the hedge fund world. While big hedge funds typically prefer private ownership, some have turned to public markets with mixed results. Sculptor, formerly known as Och-Ziff Capital Management, saw a significant drop in value after listing in 2007.
Private capital firms like Blackstone, Apollo, and KKR have seen significant value growth in the public markets. However, issues with scaling up and maintaining performance have deterred many hedge fund groups from following suit. Pure-play hedge funds have struggled with the impact of growth on returns, leading to outflows and volatility in performance fees. In contrast, the leading private market investors have successfully expanded into different areas such as private credit, real estate, and infrastructure.
The potential listing of Pershing Square will be a significant test for the hedge fund industry. With a fund already trading on the London Stock Exchange and Euronext Amsterdam, Pershing Square manages about $15bn of assets. Ackman’s recent sale of a 10% stake in the firm values it at over $10bn, making it more like a listed private equity firm than a traditional hedge fund in terms of locked-in capital. However, Ackman’s high profile and success will draw potential investors, and the firm will need to demonstrate that its investment performance extends beyond him.
In conclusion, while Ackman’s move to list Pershing Square may signal a shift in the hedge fund industry, challenges remain in scaling up and maintaining performance in public markets. Private capital firms have successfully navigated these obstacles, but hedge funds have struggled with the impact of growth on returns. Ackman’s firm will need to show that it can diversify and maintain consistent investment performance to succeed as a listed entity. The rise of private market assets under management highlights the potential for growth in this sector, but the unique challenges faced by hedge funds must also be addressed.
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