Today's Economist has a fantastic cover story about hedge funds that is very pro activist investors and amusingly anti-management and anti- "lazy stockholders."
They then go into detail in an article that proclaims activism will "change American capitalism for the better."
Even if you already know all of the information, or live it daily, they're really good reads.
Activists are front and center in finance right now. I'd like to join one.
Soon enough there will be a slew of posts on WSO asking how to break into an activist (event-driven) hedge fund, the prestige, exit opps, etc.
Bill Ackman spoke at my school this past week. The guy is incredible.
I can imagine. I've been a fan ever since reading "Confidence Game"
He's enormously charismatic and really brilliant. I saw him speak at an HBS Investment Conference a couple years back and he was great.
The guy is also a massive douche. He is extremely talented, but also comes off as an activist investor who takes bitching and moaning to another level in order to get his way.
Milton Friedman must be turning over in his grave. One of the few areas where I disagreed with him because of the exceptions to his otherwise correct rule.
Two types of activist investors: ones who genuinely see long-term value by pressuring management to take a different course of action
and
capital allocation monkeys looking to ruin a companys balance sheet to lever up and buy back stock at market highs...
I've actually met the guy in person at a private social event (not a school event or investing conference). Lots of people on WSO wear rose-colored glasses when talking about these high-profile hedge fund managers, but in my opinion, they are all the same. They always think they are the smartest guy in the room. Anybody who doesn't agree with me is an idiot. Etc.
You might be the wealthiest (or one of the wealthiest, at this particular event there were a number of billionaires attending, so Ackman probably wasn't the wealthiest) guys in the room, but that != you are the smartest guy. It's fine to have a strong conviction about something, but truly smart guys should also be flexible and open-minded. They are able to see things from multiple points of view. Everything is not just black or white.
Among the things we talked about was the special guest speaker for this other event that was coming up. Ackman, who was one of the co-organizers/co-heads wanted to hire a certain famous person who would charge an arm and a leg in speaking fees, whereas another co-organizer, who had a special connection to another high profile famous person was able to get him to speak for practically nothing. Most people on the organizing side of things were on this other co-organizer's side (and eventually, that is who was ultimately chosen), and Ackman was basically talking shit (ad hominem attacks) about how his choice was better and the other guys on the board/committee are idiots.
I remember there was one other guy around my age (most people in attendance were much older, average age probably 50+) who was standing next to me and listening in on the conversation. Bright eyed and bushy tailed. Nodding his head attentively whenever Ackman spoke (lol, he's not going to give you a job bro, ease up on the act...). Meanwhile, I could see Ackman for who he really is.
Sharp investor? Sure. Intelligent (although I know plenty of scientists and mathematicians who are higher IQ-wise) and eloquent? Undoubtedly. However, this man has some serious character flaws. The worse part is those flaws are only magnified when someone reaches a station in life as high as he has... I guess it doesn't matter when you run an $18 billion hedge fund and are worth $1.6 billion or whatever it is.
100 years from now, people might still be talking about Warren Buffet. Will they still be talking about William Ackman? That isn't as clear to me.
Interesting. Thanks for the anecdote. Yeah I'm sure the guy is cocky as hell, but when he spoke to us he actually came off as humble and down-to-earth. I guess it was just an act? No question was off limits; he joked a lot and displayed not just raw intellect but also humor and wit. I thought his views on non-finance topics were actually the most interesting since after all you can read about his investments online. One classmate asked him what books influenced him the most, and he mentioned Sartre's Essays on Existentialism, and Rawls' Theory of Justice. I was blown away since I never would have thought Ackman would have read those books. I took a philosophy class with a former student of Rawls, and that book influenced me as well, so it was a delight to hear Ackman discuss it.
Ackman also talked a lot about his philanthropic work and his desire to help others. He even talked about the purpose of life and how to pursue happiness. When he finished, there was a long standing ovation; everyone said it was one of the best speaker events they ever attended while in business school. Of course, this does not make Ackman a good or noble person, but I do think that perhaps there is something else besides his cocky persona in public.
The room did get super quiet when a classmate asked Ackman what he looks for in a potential hire (come on bro, there is a better chance of us banging super models than getting a job at Pershing Square), and Ackman said, "Well, we usually only hire from Harvard Business School. That person also would need a big bank or PE firm on their resume such as Goldman Sachs, Blackstone, KKR. I usually don't like to hire people who worked at other hedge funds. We want to train them fresh." Bunch of people in the room looked devastated, as if the girl of their dreams told them unequivocally that they have no shot. Lol.
On a final note. Ackman throws mixers at his Central Park apartment like once a month for singles. Apparently it's finance hotshots and really gorgeous NYC women.
Anyone who went to Harvard and took freshman expository writing or a philosophy class as a general-education requirement would have read some Sartre or Rawls.
Everyone in the audience (I'm guessing a finance-centric one) probably wishes they can one day be like Ackman - a billionaire running a successful hedge fund.
Unsurprising since they are a very lean shop. Only something like 50 employees. However, back in the day (when Pershing Square was still establishing itself) Ackman was known to hire people from non-traditional backgrounds. Wasn't there a famous story about how he hired his fishing instructor as an analyst?
Yes, that's nice and all, but can he get a reservation at Dorsia?
I agree that activist investing is overall a net positive for the markets. These guys offer a unique perspective on companies that even if their investment theses are bad, their proposals will just be rejected by shareholders (ala Pershing-Target).
Although, with this article the question arises of where does this euphoria on activist investing stop? While it is a different breed than that seen in the 80's, I would not be surprised that soon enough the "bandwagoner" hedge funds will come along, claim their activism to be in the best interest of shareholders, but are actually destroying value.
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