This content is from: Portfolio

The Morning Brief: Pershing Square Raising More Capital

Pershing Square Holdings, the public fund managed by William Ackman’s New York-based Pershing Square Capital Management, is issuing senior notes due 2022 “to make investments or hold assets” or to use for operating expenses. The firm did not disclose how much money it hopes to raise, though the New York Post reports it could be as much as $1 billion. The borrowed funds would be the latest attempt by the firm to raise what is called permanent capital—assets not subject to redemptions by unhappy investors. The fund, which began trading last October on the Euronext Amsterdam, is up 5.8 percent for the year through June 16. However, it has been partially dragged down by the high-profile short of Herbalife, the multi-level marketer of nutrition and health-related products, whose stock is up about 43 percent this year alone. Herbalife shares closed down $0.12 Thursday, to $53.84, just shy of its all-time high.

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Darden Restaurants Tuesday said its board of directors approved a plan to spin off some of its real estate assets in a new real estate investment trust (REIT). Last year, Jeffrey Smith’s Starboard Value replaced all 12 of the company’s directors after winning a proxy fight. “This strategic real estate plan is the result of a comprehensive review of alternatives to best take advantage of our real estate portfolio,” said Darden CEO Gene Lee, in a press release. “We believe this plan will result in a more optimized capital structure and will create long-term shareholder value. We appreciate the valuation differential between restaurant and real estate companies and are excited to create a new company, which we believe will unlock current value while growing through acquisitions of other properties.”

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Wexford Capital has taken an activist stake in Famous Dave’s of America. The New York firm, which manages $3.5 billion, including $2 billion in three hedge funds, disclosed in a regulatory filing late Monday that it owns 19 percent of the restaurant company, which has a roughly $140 million market capitalization. In its filing, the firm, co-founded by Charles Davison and Joseph Jacobs, said it has previously spoken with management and directors and future discussions “may relate to potential changes” to the company’s business plan and strategy as well as potential changes to management and the board. On Tuesday shares of Famous Dave’s surged more than 3 percent to close at $20.06. On Monday, Minneapolis investment bank Dougherty & Co. downgraded the shares from Buy to Neutral. Oops.

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The gap between the top-performing hedge funds and the worst performing has widened this year. Known as performance dispersion, the top decile firms—those hedge funds whose performance was among the top 10 percent of all funds—gained 12 percent in the first quarter, according to HFRI. The bottom decile posted an average loss of 7.6 percent. This works out to a 19.6 percent decile dispersion in just the first quarter. For the trailing 12 months ended in the first quarter, the top performing decile was up 35.5 percent while the bottom decile dropped 20.7 percent, for a decile dispersion of 56.2 percent. This compares with 46.9 percent for calendar 2014, when the top decile rose 27.4 percent and the bottom group lost 19.5 percent.

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