Pershing Square Has Two New Undisclosed Positions Equal To 13% Of Capital

Pershing Square annual investor update can be found below – first some excerpts..

New Undisclosed Position #1 (late 2016): ~4% of Capital

  • High quality business that generates predictable, recurring cash flow
  • Global business with best-in-class management team
  • Buying opportunity presented due to cyclical and macroeconomic concerns despite strong long-term growth potential
  • ~22% return on average cost through January 24, 2017
  • We believe investment is still attractive at current price

New Undisclosed Position #2 (early 2017): ~9% of Capital

Einhorn’s FOF Re-positions Portfolio, Makes New Seed Investment In Year Marked By “Speculative Exuberance”

david einhorn, reading, valuewalk, internet, investment research, Greenlight Capital, hedge funds, Greenlight Masters, famous hedge fund owners, big value investors, websites, books, reading financials, investment analysis, shortselling, investment conferences, shorting, short biasIt has not just been rough year for David Einhorn's own fund. Einhorn's Greenlight Masters fund of hedge funds was down 3% net for the first half of 2020, matching the S&P 500's return for those six months. In his August letter to investors, which was reviewed by ValueWalk, the Greenlight Masters team noted that Read More

Also see: 2016 Hedge Fund Letters and Bill Ackman Books: Recommended Reading List


Decelerating International Growth

  • Growth in China – Herbalife’s 2nd largest market – has decelerated in recent quarters

SEC probing HLF’s anti-corruption compliance in China; DOJ involved

Management Turnover

  • Michael Johnson is slated to become Executive Chairman in June 2017 (The FTC injunction takes effect in May 2017); Rich Goudis, HLF’s COO, to succeed Johnson as CEO

Evolving Consumer Sentiment Towards MLMs and Herbalife in Particular

  • On November 6th, John Oliver’s Last Week Tonight aired a scathing 32-minute segment on MLMs with a specific focus on Herbalife
  • Independent Herbalife documentary “Betting on Zero” slated for multi-city theatrical release in March 2017 with online video-on-demand dissemination thereafter

Ongoing FX Headwinds

  • ~80% of Herbalife sales are in ~93 international markets

Also see: Warren Buffett, Charlie Munger Emails With Bill Ackman

Fannie Mae

  • Fannie and Freddie are essential for widespread access to a prepayable 30-yr fixed rate mortgage at a reasonable cost
  • The 30-yr fixed rate mortgage is a unique feature of the US mortgage market that significantly improves affordability and is key to maintaining current home prices
  • We believe Fannie and Freddie can be reformed to reduce risk to the taxpayer
  • We do not believe there is a viable alternative to Fannie and Freddie
  • If Fannie and Freddie can be reformed, we believe the taxpayer will be a huge winner – US Treasury owns warrants for ~80% of the common stock


We continue to believe that a reformed Fannie and Freddie is the only viable solution for mortgage finance reform

Our key principles for reform as presented at Ira Sohn in 2014:

Key elements to reform the GSEs:

  • Significantly increase the GSEs’ capital requirements
  • Eliminate the GSEs’ fixed-income arbitrage business
  • Subject the GSEs to substantially increased regulatory oversight
  • Develop appropriate compensation and governance policiesIf the GSEs increase their capital levels and become pure mortgage guarantors, they can be a simple, low-risk, and effective solution for housing finance reform


FNMA and FMCC share prices have increased 66% and 73%, respectively, from our average cost at announcement date to January 20, 2017

Personnel Updates in 2016 and 2017

2016: Employee count reduced from 72 to 60

2017: Departure of one employee

  • Joe Sutton, CTO in January 2017

Investment Team Analyst Additions in 2017

Bharath Alamanda

  • Joining Pershing Square in September 2017
  • KKR & Co.
  • Goldman, Sachs & Co.
  • B.S.E., Princeton University

Feroz Qayyum

  • Joining Pershing Square in September 2017
  • Hellman & Friedman
  • Evercore
  • B.A., Richard Ivey School of Business, University of Western Ontario

Long-Term Incentive Plan (“LTIP”)

A new form of compensation and long-term incentives for long-standing employees

Pershing Square previously had two forms of compensation

  • Base salary and bonus compensation
  • Profits interest in management and incentive fees – behaves like equity but terminates when employee departs firm

Profits interest partners are eligible to be a member of the LTIP

  • Vests over 10 years of partnership tenure
  • Retiring employees continue to receive a reduced percentage of their profit interest on a permanent basis
  • Contains a non-compete clause

New compensation structure aligns with the firm’s and investors’ interests

  • Reinforces our focus on long-term performance and value creation
  • Encourages long-term retention, with minimal, but healthy, levels of turnover after long tenures

Organizational Updates in March 2017

Tim Barefield, COO to retire

  • Over 10 years at the firm Tim has been responsible for building out a best-in-class operation
  • Tim plans on returning to academia

Nicholas Botta, CFO, will assume the title of President and will be responsible for non-investment team related operations including overseeing technology

  • Nick has worked with Bill since 2000 and has been integral to managing firm operations since inception

Michael Gonnella, Senior Controller, will assume the title of CFO

  • Mike has been with the firm for 11 years responsible for day-to-day management of the finance team

Amy Szeto and Adam Rapp will assume Senior Controller roles

  • Amy and Adam have been members of the finance team for over 10 years

See the full PDF Here: 2016-PSH-Annual-Update-Presentation-FOR-DISTRIBUTION-1