Pershing Square Plans $1 Billion Single-Stock Fund

Jul 9 2013 | 12:35pm ET

Pershing Square Capital Management is seeking up to $1 billion for a new special-purpose vehicle that will invest in a single stock.

The New York-based hedge fund aims to raise the money over the next nine days. The SPV will invest alongside Pershing Square's existing hedge funds, which will invest up to $2 billion in the stock itself. Pershing Square aims to buy in excess of 5% of the stock and then launch an activist campaign to force changes.

An institutional investor has given Pershing Square an "indication of interest" to invest $200 million in the fund, it said.

The hedge fund did not identify the stock, saying only that it is a large-capitalization, investment-grade U.S. corporation that operates primarily in a single business. Pershing Square founder William Ackman wrote that its stock trades at a lower multiple than its closest competitor.

"The business is simple, predictable and free-cash-flow-generative, and enjoys high barriers to entry, high customer switching costs and substantial pricing power," he wrote.

The new SPV is not the first time that Pershing Square has created a single-stock fund, but the firm certainly hopes it goes better than its previous attempt. A $2 billion Target Corp.-only fund raised in 2007 lost 90% of its value in just two years.

Pershing Square has launched four previous single-stock funds.

The new fund will charge a 0.25% management fee and a performance fee of between 5% and 15%.

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