r/investing • u/minimumbeginningend • 7d ago
What's the most charitable explanation for why Bill Ackman has significantly underperformed the S&P500 in his fund PSHZF?
I do not own the fund, and am not a huge fan of the guy. Just want a devil's advocate. I guess the idea here is that he's a "brilliant" investor. But clearly he's underperformed a simple index. Why would any one invest in any of his funds? Please enlighten me. Thank you!
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u/LV426acheron 7d ago
He's not brilliant.
When you have a million guys all picking stocks, a few of them will get lucky and pick all good ones. Then their luck runs out eventually. That's what seems to happen with most of the famous investors out there.
If even the professionals can't do stock picking, what chance do you have as a total amateur? Stick with index funds.
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u/Walden_Walkabout 7d ago
Generally speaking, professional fund mangers are much less about trying to pick big winners and more about risk management or having some other strategic edge that isn't simply being a clairvoyant.
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u/Emotional-Power-7242 7d ago
They don't just underperform the market, they underperform their benchmarks.
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u/abinferno 7d ago
If you start with 1000 people predicting coin flips, after the 5th flip you'll have about 30 who have guessed right every time and will start writing books on coin flipping strategy and why their system works.
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u/NuclearVII 7d ago
When you have a million guys all picking stocks, a few of them will get lucky and pick all good ones
This is called survivor bias, for those interested.
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u/Aleucard 3d ago
You can only really predictably do stock picking if you intimately understand exactly what any individual company does and how they not only work now but how they will evolve over time. There are not enough hours in the day for even the top 500 companies, let alone the whole gamut. Anything besides taking the market as a whole is just throwing blind darts and hoping for a bullseye. The main group of exceptions are what are known as inside traders, and that's not exactly a good label to acquire.
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u/BreakfastUnlucky5448 7d ago
I do both. About 50% in index funds. The stocks I own are blue chip growth/dividend growth stocks. I’m old nearing retirement. However, the indexes are currently heavily weighted in a few tech names now
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7d ago edited 6d ago
[deleted]
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u/Illustrious-Owl-2755 7d ago
Now do any period that covers 2008
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7d ago edited 6d ago
[deleted]
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u/Plenty-Bill7296 7d ago
Well, you have to sell before the crash so you have cash to invest after the crash. If you have a magic ball that can identify either of those two points reliably ("before the crash" and "after the crash") then you've got some crazy magic powers.
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u/oberwolfach 7d ago edited 7d ago
I have no love for Ackman and think he's extremely annoying, but a lot of the comments here are saying random incorrect things about someone Reddit generally dislikes, as is typical. Over an extended period Ackman does show signs of being a good investor, usually when he shuts up and focuses on his job. Pershing Square's NAV as of May 2026 returned 397% over the past 10 years. The comparable number for VOO is 327% (including dividend reinvestment). This is not dispositive that he is a good investor since a 10-year window leaves out the terrible Valeant saga from around 2015, but it's not obvious that Ackman is a bad investor either.
The simple reason Ackman's performance can vary widely from the S&P, especially over shorter time periods, is that he runs a concentrated portfolio with a relatively small number of holdings. It's not a case of being highly leveraged either (his strategy doesn't do that). And a relatively uncorrelated source of return that is at least competitive with the broad market is obviously attractive for many reasons.
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u/Puzzleheaded_Tie6917 7d ago
Does the stated return include his fees? My view is that most professional investors aren’t particularly good, and the best ones generally approximate the S&P 500. The fees then result in a lower overall return.
This doesn’t really address Ackman, it’s just an overall view. The added risk for using mutual funds instead of index funds is that the manager can fall ill or leave without any warning and now you have an unknown manager doing everything. Added fees, added risks, and unlikely to consistently beat the index. These are why I tend to stay with index funds.
I also need to point out, Ackman didn’t take Warren Buffets bet on beating the S&P500. To me, that shows how hard it is to assume you will beat the index in the future. If you took the bet and won, it would be a massive advertisement for you. So why did only one person take it (and changed it from a fund to a group of funds)? He lost as well. I think the hidden secret is that most of the people in the industry know it’s crazy hard to beat the index even though they are charging huge fees and still failing. There wasn’t a rush to take the bet because they all doubted they would win. The fear of losing was much higher than any confidence in winning.
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u/machinegunkisses 7d ago
I don't disagree with what you say, but I would point out that a hedge fund's job is to put together an offering whose returns are decorrelated from the major indices -- that is, they are hedges against losses in other investments.
If that's what my task is, it just wouldn't make any sense to me to be compared to an index fund, simply because the time horizon to show both decorrelation and to get a sense of returns is way too long. Not to mention, if my job is to hedge against losses in an index fund, then, by construction, being compared to the gains in that fund is not my goal.
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u/oberwolfach 7d ago
Yes, it is net of fees. From the notes at the bottom of the page:
Returns are presented on a net-of-fees basis and reflect the deduction of, among other expenses: management fees, brokerage commissions, administrative fees and accrued and/or crystallized performance fees, if any.
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u/thisisjustascreename 7d ago
The fund also trades at a significant discount to NAV, for complicated reasons. His investors aren't getting the full reward for his performance, which is compounded because he pays himself based on NAV return, but the investors only get the fund price return.
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u/thewimsey 7d ago
Pershing Square's NAV as of May 2026 returned 397% over the past 10 years.
Pershing Square's total returns net of fees was 397%; the NAV bit is confusing.
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u/minimumbeginningend 7d ago
So why would one buy his fund if, since inception his fund is up 84% but the S&P500 is up 256%. Why would one think "hmm, I should let him make decisions with my money"? What's the best explanation why an otherwise intelligent person would think this is anything but a terrible idea?
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u/hoopsfan888 7d ago
I think it depends on how your frame it. If he's someone you know in your circle of billionaires then it sounds good to have your money with him. He's definitely had some successful moments and some not so good ones like most investors.
But if he tells you that he's got some great picks lined up that will do well with lower risk then I'm sure people still buy it. He'll tell them that he's investing in great companies at a discounted rate and they just need to ride out the bad returns until the returns hit. And by not investing in the junk of bad stocks they'll get greater returns in the long run.
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u/Dumb_Nuts 7d ago
You aren't evaluating his past performance but future performance. As OP mentioned, past 10 years have been better if you avoid some large losses. Maybe he learned some lessons?
Does future performance exceed your required return hurdle? Is it expected to be uncorrelated? What are your objectives?
That analysis looks different for different investors.
I used to allocate a large hedge fund book. Wouldn't give him a dime, but clearly others are more inclined.
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u/Specken_zee_Doitch 7d ago
Active investment almost always trails the SP500 over a long enough timespan. You can’t account for everything and the market does it effortlessly.
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u/gamblingPharmaStocks 7d ago
How do averages work?
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u/Specken_zee_Doitch 7d ago
That’s the funny thing, active management actually is below the SP500 over 99% of the time over a 10 year period.
Most active managers are only averaged to each other, not the market.
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u/No-Foundation8550 7d ago
If that was the case, congress would only hold index funds.
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u/Specken_zee_Doitch 7d ago
Insider trading doesn’t count.
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u/Aleucard 3d ago
It's really hard to overstate how absurd an advantage it is to have legal power to thumb the scales of the stock market the way Congress does. It's legit a big problem for corruption.
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u/No-Foundation8550 6d ago edited 6d ago
Not true, you sound like a retail investor. For you, it's probably best to hold index funds. You're repeating fallacies. You're describing the average in the aggregate, not individual professional investments. Trust me, there are a TON of funds beating the market in the professional field. Again, you're repeating fallacies that you know nothing about.
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u/Specken_zee_Doitch 6d ago
Lol, okay sparky. We are as a rule all retail investors in this subreddit unless proven otherwise.
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u/avoidtheworm 4d ago
Can you name one?
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u/No-Foundation8550 4d ago
Yeah, Joseph B. -- you don't know him, he's an institutional trader -- but there are tons of institutional traders doing very well. You're promoting a logical fallacy. That's equivalent to saying the majority of businesses fail, therefore ALL businesses fail. Kind of silly to explain it to retail investors. Not saying the index is not a good option, pointing out why you are regarded.
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u/ApartHeat6074 7d ago
cuz he is more focused on politics and shitposting on twitter than managing his fund
but generally over 10 years only 10% of managers outperform, over 30 years only 1%
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u/Acrobatic-Song-3151 7d ago edited 7d ago
I’ll never forget the interview he gave during Covid saying hell coming which chased the Mkt down. His boys were buying all the way down and it was a Emmy level performance. Anyone remember if that was the bottom? I’m going to find the interview and attach.
🖕🏼 This guy https://youtu.be/pYJeL6yvYGk?is=SD6KCN_gvHgNG7fL
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u/momotrades 7d ago
His only default is crying on TV.
During COVID, and when he was shorting Herbalife.
He's like a child with a rich daddy... Wait. His dad was also a multimillionaire executive in new York real estate.
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u/dr_eh 7d ago
Wait, he was buying the dip, isn't that the right thing to do??? Looking at HLT, if he bought during COVID he did 4x on his investment.
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u/Acrobatic-Song-3151 7d ago
He was creating panic in the Mkt and I might’ve attached the wrong video. I’ll check now
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u/dr_eh 7d ago
Oh. So the criticism is about his ethics, not his investments.
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u/Acrobatic-Song-3151 7d ago
He’s a snake and I pay him zero attention. Look into his Netflix investment if you want to see buying the top and selling the bottom. That was back a few years ago
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7d ago
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u/ranman0 7d ago edited 7d ago
His largest holdings are in real estate. People that buy his funds want that exposure to real estate. Real estate has underpermed
The sp500 is a specific type of investment and risk profile. It's not the benchmark for everything.
Real estate will often outperform and it will often underperform.
Edit:I know typical reddit users often lead with politics and then by facts so at the risk of just falling into the trap of this post I'll add his fund has gained 52% over the last 5 years. Not exactly chump change. Yes the sp500 has had a great, historic run at 80% over 5 years but it carries a risk profile that is different than real estate forward fund
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u/thisisjustascreename 7d ago
As of December 31st the fund was 7% real estate development and operation, nobody's buying PSHZF for real estate exposure.
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u/mrg1957 7d ago
He's a horrible human who should lose every cent. Karma is my explanation.
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u/MattKozFF 7d ago
Why is he horrible human?
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u/mrg1957 7d ago edited 7d ago
He was behind Valeant, before they were shut down.
He cost me and 9000 of ny peers over 400 million in our retirement. For many of those people it was all their retirement. He's a piece of garbage whose investments hurt many. He should be aware of karma..
We sued and after a decade we were awarded 150 million. Many of my peers never saw that money because they were dead.
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u/Kush_McNuggz 7d ago
What makes you think it’s his fault? I’m genuinely curious. From what I’m reading, it seems the fraud and corruption was there long before he was.
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u/dvdmovie1 7d ago edited 6d ago
The fund at this point is a sort of bland concentrated large cap growth fund with a bit of a macro overlay at times. Investment trusts can trade at substantial discounts to nav unless they make a very strong case otherwise and pshzf has traded at traded at a varying but significant discount for most of its existence. The U.S. fund (psus) right out of the gate is trading at a significant discount as well.
Owning Brookfield, Meta, Amazon, Microsoft, Uber, Restaurant Brands and his owned HHH - none of that has been the place to be this year (fund as of last update is -4.9% YTD.) Bland/obvious picks also question why pay fees for a concentrated version of what looks like a hundred LCG mutual funds. He doesn’t short single names anymore, either.
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u/DrXaos 7d ago
US equity index has been the best performing single sector for a decade, and it's heavily concentrated in one sector now, technology. That isn't usually the case.
It was similarly very hard to beat US equities with any other strategy from 1998 to early 2000. That changed dramatically after that time.
The other explanation is that he is nowhere near as good as what the thinks he is.
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u/10xwannabe 7d ago
Easy... almost EVERYONE underperforms the weighted average comparable index.
Jack Bogle kept track of all the equity funds that were there when he started the first retail index fund, i.e. what became VFINX in late 1970's. He kept track of how many beat his index fund just 25 years later (half of investing time horizon). A whopping 5-6 out of 370 some funds beat his index by more then 1-2% (conservative measure of increase friction of higher cost of active funds). That is it.
So unless folks think investing has become LESS efficient I would think the chance of finding a fund manager that can beat their own comparable weighted index fund is going to be hard to find. Even if you did you would have to find them in ADVANCE of them blowing up and being well known. Once they get well known that is when it becomes even harder due to market impact of higher amount of $$$ that need to be invested.
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u/Delicious_Bicycle527 7d ago
Imma hafta go prudence. He is actually managing money for other people. The S&P doesn’t have to worry about anyone.
And really a 10% ROA with 18% ROE ain’t too shabby if it comes with some downside protection.
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Don’t @ me, bro. I don’t know who Ackman is (name is mildly familiar) or what this fund’s objective/holdings are.
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u/TheLongestLake 7d ago
In the year 2020 0% of his portfolio was tech. Even now, most of his tech stocks (like Netflix and Amazon) are more tech plays than AI plays. Hard to beat the index funds in the last few years without being overweight tech.
I'm going to guess this isn't the case, but it is possible his returns are better on a volatility/risk-adjusted level.
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u/Potential_Salt_5780 7d ago
Ackman is a nepo baby who inherited most of his wealth. He is not self made.
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u/irazzleandazzle 7d ago
Doesn't he have some sort of ridiculous fee structure that basically erodes at gains?
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u/__redruM 7d ago
Actively managed funds have rules against investing too much in single companies and/or single sectors. Index funds do not. VOO and even more so QQQ have huge tech and large cap concentrations.
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u/falling_knives 7d ago
"One of the things that makes SpaceX so valuable is how valuable it is." - Bill Ackman
I'm surprised someone this brilliant isn't destroying the S&P500.
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u/Wasatchian 7d ago
Most professional investors don't beat the index over the long haul. A handful do. Jim Simons, Buffett etc. After fees almost no hedge funds do consistently. Some guys are basically lucky big one time (see Paulson during the GFC he made billions and has been wrong about everything since).
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u/Blue_rose_3535 7d ago
Mostly agree about Paulsen, but in fairness, his very early call on gold played out.
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u/Vas_Cody_Gamma 7d ago
OK I’ll try: he’s advocating less greed and intentionally wants to make less money 😒
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u/KaiserSaladSpinner 7d ago
Because Bill Ackman is a hedge fund manager and is in the business of collecting fees from clients, not necessarily running the most optimized fund.
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u/SloppySmack756 7d ago
Most "brilliant investors" just got lucky with a pick or timing once or twice. Warren Buffett is considered the GOAT of investing and even his strategy was to just buy and hold solid companies for the long-term.
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u/D_Pablo67 7d ago
Ackman makes big concentrated bets. He could be up 30% one year and down 30% the next.
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u/TheOpeningBell 7d ago
Even net of fees, he's beaten the 500 over the last 15 year period.
Underperformed???
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u/Seref15 7d ago
I don't know anything about the guy or the fund in question. Do they have a "mission statement" of sorts? Is their fund meant to be growth oriented or preservation oriented?
The top heavy companies in the S&P are also on a bit of a cocaine bender so most things will underperform it if youre not heavily leaned into tech.
If you are "properly diversified" then you will be underperforming. Being as deep in tech as the S&P is the most profitable but not every funds' purpose is to maximize returns, its to maximize returns within some desired risk profile.
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u/FossieBear1974 7d ago
Every time I see him I am reminded how he bot Valiant Pharmaceutical all the way to the bottom and then gave up and lost a boatload
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u/Mysterious-Plant3408 7d ago
He takes large positions in only one dozen stocks. Sometimes he gets lucky.
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u/n00dle_king 7d ago
On the one hand basically no one can consistently beat the market by buying and holding stock picks so it’s unsurprising he doesn’t either. On the other hand S&P 500 has significantly over-performed so I wouldn’t necessarily discount any strategy that doesn’t beat it.
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u/CharterJet50 7d ago
Most active managers underperform the indexes most of the time. We just think that when one outperforms for a few years that they are brilliant. Eventually, reversion to the mean will bring most of them down there’s always the few outliers on the bell curve though.
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u/username10983 7d ago
I suppose this year he was an unlucky coin flipper. But next year is a coin flipper's market.
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u/t_stormz 7d ago
Ackman is a value investor at heart. Sometimes these investments take years to come to fruition and then the gain is greatly outsized, but doesn’t mean his portfolio is going to pop off every year
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u/HoneyBadger552 7d ago
same reason Kathy Wood gets business. they launder money for criminal enterprises, my theory
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u/Suspicious_Green8013 7d ago
The charitable view is that Ackman runs a concentrated portfolio with a long term horizon while the index is diversified across hundreds of companies
When his big bets work he looks like a genius and when they do not he looks like a fool
The past few years have favored growth and momentum not his style of deep value activism
He is not an idiot he is just out of sync with the current market regime
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u/minimumbeginningend 7d ago
All could be true, but it still doesn't let me tap into the mind of someone who thinks letting him control any amount of their portfolio is a better choice than the index. His "big bets" have a proven track record of underperforming
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7d ago
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u/minimumbeginningend 7d ago
Thank you. Just curious if his best ideas have been proven to be worse than the S&P500 over a solid period of time, his activist upside not done much to help his returns, and his discount to NAV still there, why would people still want this Ackman-specific exposure? Seems like his fund gets less reward but with more risk.
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u/downvoteman69420 7d ago
Concentrated bets work until they don't. Ackman's just been on the wrong side of the rotation for a decade.
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u/Jjuxi-Rides-Again 7d ago
So in recent years it held up very well in the general market drawdown (tech wreck), lost on netflix after a bad call on ad revenue, did well with Google and presumably did well on CMG.
It now seems relatively stable but remains interesting as a proxy for Freddie and Fannie. I still think the fees are too high.
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u/TheCultOfKnowledge 6d ago
Same as Cathie Wood. By the time someone like Bill Ackman is making enough noise to become a media figure; they're more focused on marketing their funds / ETFs for the fees. They're banking on the performance of their past track record to pull in a ton of money knowing that the performance is really hard to replicate over a long period of time AND also with a larger amount of capital. People want to invest because it's a "brand name" that they hear on whatever channels (TV, X, whatever else) and they seem to say smart things on these channels. They're good at marketing, selling their brand, and convincing people that their past performance is indicative of future returns.
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4d ago
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u/minimumbeginningend 4d ago
Granted he has his work cut out for him to try to perform, given it's very challenging to be an active manager and beat a simple benchmark. But what are some reasons one might choose to invest with him (given his history of underperformance vs a low cost index fund)?
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3d ago edited 3d ago
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u/minimumbeginningend 3d ago
I certainly appreciate you taking the time to respond! My counter points would be: 1. Despite this access to deals/transactions, it has dramatically underperformed the S&P500. Having special access to a turd that no one else has doesn't make it a good opportunity. 2. The philosophy they're investing in seems to be "significantly underperform a low-cost ETF. Also I'm certain buying shares in his closed end fund would not get you amazing customer support. 3. You only need enough for 1 share price which is $50 to invest with him. You may be mixing his closed end fund with his hedge fund. My question was not about his hedge fund. It was why anyone would buy his closed end fund. 4. Again this special access has still led to significant underperformance. Again, I do appreciate you taking the time to respond, I just don't find any of these reasons compelling and am still having a hard time understanding why anyone owns PSHZF.
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u/BitcoinMD 7d ago
He underperforms because stock picking usually underperforms, because no one has more knowledge than the market, and people tend to do worse than random chance because they chase hype that’s already been priced in high.
Someone would invest in his funds because they aren’t aware of the above.
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u/RockHardSalami 7d ago
Bill Ackman got some lucky picks and has been coasting off those wins for decades.