Bill Ackman is reportedly making plans to raise $4 billion for a close-end fund on the London Stock Exchange, following the lead of other hedge fund managers, like Daniel Loeb and Allan Howard, who have increased their exposure to more permanent investors.
Close-end funds are designed to raise permanent capital for clients, and, unlike hedge funds, it is harder for those holding close-end funds to cash out of their positions. If they wish to do so, they must sell their holdings on the open market.
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Bill Ackman, the activist investor with holdings in Allergan, Air Products and with a controversial short position in Herbalife, indicated in a letter to investors from his hedge fund Pershing Square that he was thinking in this direction. He wrote:
“Because we are an active and influence-oriented investor, we have avoided being fully invested because of the risk of investor redemptions. We will hopefully begin to address this issue with the initial public offering of Pershing Square Holdings, targeted for later this year, which will increase the amount of capital that is permanent.” Later in the letter, Ackman said that Pershing Square funds had risen 25% so far this year.