Bill Ackman Is Launching a New Pershing Square Ventures Fund to Give Everyday Investors Access to Pre-IPO Companies. Here Are 4 Things Investors Need to Know Before They Dive In.
Do you ever wish you could buy stakes in companies before they go public? It’s not impossible, although it can be difficult, and somewhat convoluted. Most of these few offerings still aren’t exactly suited for smaller investors.
Hedge fund manager Bill Ackman plans on changing this, and soon.
Ackman is the chief stock picker behind Pershing Square Capital Management, L.P. (aimed at larger, accredited investors) and Pershing Square USA (PSUS +1.62%) (for smaller retail investors), which holds a hand-picked portfolio of publicly traded equities. Ackman also runs Pershing Square Inc. (PS +1.21%), an alternative asset management firm, while its primary investment vehicle is Pershing Square Holdings (PSHZF +0.99%).
Ackman is working on a new investment vehicle for smaller retail traders that will own private stakes in pre-IPO companies. He spoke about it earlier this month.
Pershing Square Capital Management CEO Bill Ackman. Image source: Getty Images.
As Ackman explained at the time of the announcement, “One of the biggest complaints of the average investor today is that while SpaceX is an amazing company and still has a great trajectory, their first chance to invest in SpaceX was at a $1.5 trillion valuation.” That’s why the so-called Pershing Square Ventures fund will be made available to ordinary investors, allowing them to participate in a part of the market they’ve largely been locked out of.
To this end, here are the four big things you need to know about the planned venture fund:
1. Pershing Square Ventures can and will hold both private and publicly traded companies
Obviously, Pershing Square Ventures will own equity positions in companies before they become publicly traded. A holding’s IPO doesn’t necessarily mean Pershing will exit that trade, though. The fund’s managers have the option of sticking with their position after a public offering is completed, allowing them to maximize their gains when the right opportunity is in place.
2. Management fees should be relatively low
Like any other fund, this one will impose a recurring management fee (taken out of its performance rather than directly billing shareholders). And, like any other actively managed fund, this one’s management fee is likely to be above the fund industry’s average.
Broadly speaking, though, Pershing Square Ventures’ closed-end “evergreen” structure should make it relatively cheaper to manage than similar private venture funds. The specifics of its fees won’t be known until the official launch, and even then are subject to change.
3. The initial portfolio is yet to be decided, but…
Although Ackman has predictably narrowed down this fund’s initial focus to biotechnology and artificial intelligence investments, Pershing Square Ventures’ positions will change over time.
That being said, Ackman doesn’t expect investors to buy in at its launch without having at least some idea of what they’re buying into. He’ll be pulling — and disclosing — some of Pershing’s current private stakes over into the venture fund’s portfolio. The fund is also likely to receive some private funding before becoming publicly traded itself just so it can round out its inaugural positions, although we still won’t know what all of those initial holdings are until closer to the launch date.
4. Pershing Square Ventures should launch before the end of this year
Pershing Square Ventures’ official public debut date hasn’t yet been set. Ackman did indicate it would become available by the end of this year; however, with the possibility of it coming to the market sometime this fall, depending on how soon Pershing can complete its filings with the SEC. We’ll get an official ticker nearer that launch.
