By Svea Herbst-Bayliss
BOSTON Oct 2 William Ackman's Pershing Square Capital Management staunched two months of bleeding in September, as his flagship fund eked out a gain, leaving its returns for the year roughly flat, according to a performance update.
The activist investor told clients that the Pershing Square LP fund gained 0.2 percent last month, an improvement from August's 3.6 percent loss and July's 2.2 percent decline, according to an update that was seen by Reuters.
While Ackman did not say what helped the fund, it is clear that he benefited from exiting J.C. Penney shares at the end of August, before the retailer's stock price tumbled 30 percent in September.
Ackman, once the retailer's biggest shareholder, a board member and its most public cheerleader, sold his 18 percent stake in J.C. Penney at $12.90 a share. Other prominent investors who had also been big shareholders, including George Soros, Richard Perry and Kyle Bass, likely suffered heavy losses as the stock price dropped sharply. It closed at $8.72 on Wednesday.
Still the Penney debacle, where Ackman lost roughly $500 million, has left its black mark on Ackman's fund, which started the year with a 6.2 percent gain in the first quarter. Ackman is still considered a very talented investor, however, and he has delivered an average annual return of 20 percent since launching the fund in 2004.
The fund is up 0.5 percent for the year through the end of September, trailing the 4 percent gained by hedge funds, on average, and lagging far behind the roughly 19 percent gained this year by the Standard & Poor's 500 stock index.
The fund, which started the year with $12 billion, now manages $10.8 billion, the performance update said.
Gains in stocks, including Beam, Canadian Pacific Railway and Air Products & Chemicals, where Ackman announced an activist position in late July, helped the fund. But its $1 billion short bet against Herbalife hurt as the food supplement's company's stock price climbed in September.
With Air Products and Chemicals, Ackman is taking a more low key approach, having not spoken publicly about the stock once even though the hedge fund scored a major victory last week when the company said it would look for a new chief executive and add three independent directors.