Morning Brief: Ackman Cuts Pershing Square Management Fees

Bill Ackman’s Pershing Square Capital Management will reduce the management fees it charges for the funds that were invested in Allergan by $32.2 million over the next two years, it said in a statement.

The fee reduction relates to recently agreed settlement in litigation with Allergan investors that will cost Pershing Square $193.75 million, if approved by the court.

Normally such costs would come from a reduction in incentive fees, but Pershing Square has been incurring losses for the past three years and so has no incentive fees to cut.

Pershing Square said it could consider these settlement costs expenses, under its fund documents. But since the firm has been losing money, it is departing from its legal obligations in order to cut the fees.

“We believe that following the incentive fee and expense allocation methodologies specified under our fund documents in this situation would leave investors in a less than ideal position. As such, we believe a different approach, albeit one not contemplated by the funds’ documents, is appropriate,” Pershing Square said in a statement.

Pershing Square said the move to cut management fees will not change the existing year-end 2017 high-water marks, which reflect the full settlement expense. “Incentive fees will not be paid until the full amount of the settlement and other losses have been fully recovered,” it said.

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Carlson Capital is down $1 billion over the past five months, a combination of performance losses and redemptions, Business Insider reported.

At yearend, Carlson had $8.2 billion in total firm assets, compared with $9.1 billion in in August. Hedge fund assets declined $1 billion to $6.6 billion. Carson’s Black Diamond Thematic fund lost 22 percent last year, with assets falling more than $300 million, Business Insider said.

The firm’s flagship multistrategy fund fell 4.47 percent, and the leveraged version fell 5.99 percent. A spokesman did not return a request for comment.

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John Paulson’s hedge fund troubles are continuing, Bloomberg reported.

The Paulson Partners Enhanced fund, a leveraged version of Paulson’s traditional merger arbitrage strategy, fell 35 percent in 2017, its fourth losing year in a row, according to Bloomberg. The fund fell about 49 percent in 2016, it said.

Paulson & Co. now runs $9 billion, down from a peak of $38 billion. About 80 percent of the fund is Paulson’s own money, the report said. Forbes estimates Paulson is currently worth $7.8 billion.

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Another hedge fund data provider is reporting strong gains for the industry last year.

Hedge funds gained 8.83 percent in 2017, according to data provider eVestment. That follows a 5.7 percent return in 2016 and a loss of -0.71 percent in 2015.

Hedge funds focused on India and China were the biggest gainers in 2017. India-focused funds gained 35.01 percent, while China-focused hedge funds rose 34.82 percent.