Permanent capital is a hard idea for hedge fund managers to resist—and one very prominent hedge fund manager may be giving in to the temptation.
Pershing Square Capital Management's William Ackman may launch a publicly-listed version of his flagship strategy, one that would not be subject to the vicissitudes of nervous investors. Ackman, who last month was practically pining for permanent capital in his latest letter to investors, could seek to raise as much as $3 billion for the new fund, AR magazine reports.
"We have spent a few months examining alternatives for creating permanent capital for the funds," Ackman wrote. "We are closer to identifying a solution, but we have postponed pursuing such an alternative until the time is right."
Ackman is currently in talks with investors about a closed-end permanent capital vehicle, although nothing has been finalized. The activist firm could list a fund by the end of this year, although an early 2012 listing is also possible.
Brevan Howard Asset Management, CQS and Harbinger Capital Management are among the hedge funds to manage publicly-listed permanent capital vehicles. Ackman does not plan to take Pershing Square, which has $10 billion in assets under management, itself public, as Och-Ziff Capital Management and Fortress Investment Group have done.
"The only truly permanent capital today in the funds is that of our long-term employees and other affiliates, which today represents approximately 8% of our capital," Ackman explained. "If we could increase the amount of our capital that is permanent, it would enable us to be more opportunistic during times of market and investor distress, and would also enable us to take larger stakes in a greater number of holdings."