The Alpha Masters: Unlocking the Genius of the World's Top Hedge Funds

Chapter 6

The Activist Answer

William A. Ackman

Pershing Square Capital Management

This is not a black-box strategy. With most of our investments, we share our thesis about what’s going to happen.

—Bill Ackman, February 2011 interview

“What motivates people to succeed?”

That was the question posed by the 45-year-old hedge fund manager Bill Ackman to a roomful of students in a real estate entrepreneurship class at Wharton Business School. It was a sunny afternoon in October, the last class of an eight-lecture series, and the students had prepared by reading Christine Richard’s book Confidence Game, which details Ackman’s six-year battle with bond-insurer MBIA. But even after a few hundred pages on that struggle, and the subsequent fight with then New York Attorney General Eliot Spitzer, the students were still not prepared for Ackman’s answer.

“Sex,” he told them. “People don’t like to admit it, but it’s the primal driver.”

There was pin-drop silence. Slowly, a few chuckles began to break out from the back of the room. Ackman took off his suit jacket, rolled up his sleeves, and glanced up at the clock. Perpetually overcommitted, the founder and CEO of $11 billion fund Pershing Square Capital Management had been in meetings in surrounding Pennsylvania all day and, by then, was running low on energy.

Pershing Square’s goal is to work closely with the companies in which it invests to make their businesses more valuable by improving operational performance, selling or spinning off noncore ...