Pershing Square Misses The Target, Big Time

Feb 9 2009 | 1:11am ET

Not all hedge funds got back on target last month, as it were.

Pershing Square Capital Management’s fund that invests exclusively in Target Corp. securities plummeted another 40.1% last month after dropping 68% in 2008. The fund has lost 89.5% of the $2 billion it raised in 2007.

In the wake of the disastrous performance, the activist hedge fund shop plans to allow Pershing Square IV investors to withdraw what little money they have left in the fund, The Wall Street Journal reports. New York-based Pershing Square originally planned to allow investors to redeem only 15% of their investment.

Still, if founder William Ackman is to be believed, the firm is not giving up on Target.

“While PSIV and Target stock have declined materially, we still believe our fundamental investment case for Target stock will ultimately be realized, although not within the original timeframe we had initially estimated,” Ackman wrote in a Feb. 5 letter to investors.

Risking charges of throwing good money after bad, Ackman himself pledged $25 million of his own money to the fund, and said the firm’s employees and board members will also pony up. He also said he had restructured the fund, investing in longer-dated options that could pay off big if Target shares almost double in price over the next two years.


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