With the jails filling up with his colleagues, William Ackman has decided to invest in incarceration.

Ackman’s activist hedge fund shop, Pershing Square Asset Management, has taken a 9.5% stake in private prison company Corrections Corp. of America. While Ackman joked that it's a “hedge against your hedge fund business… as the SEC ramps up” its investigations into the industry, he told the Value Investing Congress that his investment had less to do with reforming criminals and more to do with real estate.

Ackman said the Nashville-based company is among the best-available real-estate plays in the market. He said the company’s stock should be trading at between $40 and $54 per share; it currently trades at about $25.

“The biggest risk for Corrections Corp. is that suddenly lots of people stop committing crimes,” Ackman said.

The stake, built up since the end of the second quarter, makes Pershing Square the largest shareholder in CCA.

Ackman said the hedge fund is also shorting real-estate investment trust Realty Income as a pairs trade with its CCA stake.