U.S. Markets

Ackman's public hedge fund beats market with 12.7 percent gain: report

William 'Bill' Ackman, CEO and Portfolio Manager of Pershing Square Capital Management, speaks during the Sohn Investment Conference in New York City, U.S., May 8, 2017. REUTERS/Brendan McDermid/File Photo

NEW YORK (Reuters) - William Ackman’s publicly traded hedge fund is outperforming the broader stock market this year, fueled by rising prices at Chipotle Mexican Grill and Automatic Data Processing Inc, the billionaire investor said on Thursday.

“While a few months of strong performance is too short a period to judge our performance, we believe that (Pershing Square Holdings) is back on track,” Ackman wrote in his firm’s interim financial report. Pershing Square Holdings is up 12.7 percent this year through Aug. 7.

The gains outpace the Standard & Poor’s 500 index’s 8.1 percent rise and many rival hedge funds returns and could signal a comeback for the 52-year-old manager after years of back-to-back losses that helped shrink the hedge fund’s assets to roughly $8 billion, about half of what Ackman managed at the firm’s peak in 2015.

Chipotle added 5.6 percent while Automatic Data Processing, where Ackman lost a bitter proxy fight in 2017, added 5.1 percent, the financial report said. Lowe’s Companies, a relatively new investment, added 1.3 percent. Herbalife, where Ackman expected the nutrition and diet company’s stock price to drop before he exited the bet earlier this year, hurt the portfolio with a loss of 3.3 percent.

A number of Ackman’s portfolio companies, including burrito chain Chipotle, home improvement retailer Lowe’s and Oreo cookie maker Mondelez, have appointed new chief executives. “We initiated our investment shortly after Lowe’s announced the CEO search process,” Ackman said in the report, adding that Marvin Ellison, now Lowe’s CEO, “was the leading candidate on our list of potential CEO recruits.”

Ackman’s returns are among the most heavily scrutinized in the $3 trillion hedge fund industry, especially since he has often publicly pushed management at his portfolio companies to perform better. This year, however, Ackman is pursuing a lower profile and has shrunk his firm’s size through layoffs to get back to what he calls his roots of focusing on investments.

Ackman and other Pershing Square executives have used hundreds of millions in personal assets this year to buy shares of the publicly traded fund, a step applauded by the board chair. “The board is pleased to see such a strong commitment from the Investment Manager,” Anne Farlow wrote in the introduction to the interim report.

Reporting by Svea Herbst-Bayliss; Editing by Tom Brown