Profiting from Hedge Funds: Winning Strategies for the Little Guy

Chapter 2

Bill Ackman

In Sweden, the big shareholders propose board members. In the U.S., board members elect new board members.

—Bill Ackman

Bill Ackman is founder and CEO of the hedge fund management firm Pershing Square Capital Management, established in 2004. His initial venture was Gotham Partners (1992), cofounded with classmate David Berkowitz, after receiving an MBA from Harvard Business School. Drawing on his prior real-estate experience with his father’s firm Ackman Brothers & Singer, Inc., early investments were primarily in the real estate sector. In spite of realizing good returns, the firm had a choppy end. Gotham bought a controlling stake in a golf-course operator, and added to the debt burden by acquiring other courses. To salvage the struggling golf business, the company planned a merger with First Union Real Estate Equity and Mortgage Investments, a cash-rich real-estate business. The union did not materialize, as a New York judge ruled in favor of certain minority shareholders who had filed a lawsuit against the merger. Reports1 that Eliot Spitzer, the New York attorney general, would investigate whether Gotham Partners manipulated stock prices by publishing intentionally misleading research and/or illegal trading practices, did not bode well for the partnership either. As redemptions increased, Gotham shelved the fund in an effort to equitably distribute both the liquid and illiquid assets.

Ackman teamed with Leucadia National’s (LUK) Ian Cumming to create ...