PORTFOLIO STRATEGY

Bill Ackman Is Hoping to Double His Hedge Fund’s Size Through New Publicly-Traded Fund

Hedge fund billionaire Bill Ackman has never shied away from hot takes — the CEO of hedge fund Pershing Square has been known to take aggressive stances on diversity, universities, and politics, earning him over 1.3M followers on X. Now, he’s hoping his celebrity investor status can help him double the size of his $18.7B hedge fund.

Squaring up loose ends: While Ackman may not boast the cult following of Wall Street’s most pastoral figure or manage a company like Berkshire Hathaway ($BRK-A), he’s taking a page out of Warren Buffett’s book. Inspired by the legendary investor, Ackman’s firm is launching a publicly-traded fund on US markets — Pershing Square USA. This new closed-ended fund will let investors buy into the multi-billionaire’s portfolio on US markets — and potentially hand Ackman and Pershing a monster capital infusion. But first, Ackman needs to convince investors of his track record.

• Since 2015, Pershing Square has lost half of its assets — with bad bets on pharmaceutical companies, expensive shorts on MLMs, and controversial views on US debt costing the fund billions.

• Despite this, a strong performance in 2023 — during which Pershing Square returned 26.7% — shows Ackman’s ability to hit the mark and corral returns for investors.

Trouble in Pershing Square

This week, Pershing Square is expected to raise $25B from its initial public offering (IPO) — potentially one of the largest ever. However, a report released late last week suggests that Ackman had slashed the IPO fundraising target by 90%, and delays have thrown a wrench in the launch.

• The IPO pricing for Pershing Square USA has been delayed after the SEC requested more details about the offering, investors, and comments.

• Additionally, Pershing Square has advised shareholders to disregard Ackman’s previous commitments to provide “unrestricted” updates about the fund on X.

Can controversy sell? Ackman mentioned that the fund struggles to “generate enthusiasm” around its closed-end structure. Still, the outspoken and controversial investor hopes these delays, comments, or his political views won’t overshadow the fund’s launch. The company will waive management and performance fees for the first year to attract investors. However, given the fund’s tumultuous trip to market, it’s hard to say if Ackman has the clout necessary to pull the billions he initially hoped for.

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LARGECAP RECAP

💰Republican Leaders Commit To Make US “Crypto Capital” At Bitcoin 2024 Conference

Bitcoin might be making its big leap from the blockchain to the mainstream — and this year, it might make or break an election. Politics took center stage at the Bitcoin 2024 conference in Tennessee this past weekend, where Republican leaders addressed crypto maximalists, teasing tens of thousands of attendees with glimpses of what could come out of a big conservative win this November.

• Senator Cynthia Lummis (R-WY) announced plans to introduce legislation for a “strategic bitcoin reserve,” aiming to buy 1M coins over five years to help reduce the national debt.

• Republican frontrunner Donald Trump likened the US crypto business to the early steel industry and promised to transform the US into “the crypto capital of the world.”

Reaction faction: Initial responses to the events at the flagship Bitcoin conference were timid — with Bitcoin’s price falling following Trump’s speech. However, as Democratic frontrunner Kamala Harris reportedly seeks a “reset” with crypto companies, the mood in the crypto industry has struck a new, optimistic tone. Bitcoin nearly surpassed $70K on the report, with the recent bipartisan embrace being seen as a sign that the industry might finally be coming of age after years of volatility and chaos.

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Markets & Economy

Inflation surge wanes, Fed rate cuts draw near: The battle against inflation appears largely won, shifting focus to potential Federal Reserve rate cuts. Futures markets anticipate at least a 0.25% reduction, with some predicting a half-point cut. [Read]

Trump’s voting remarks spark controversy: Former President Trump told Christian conservatives they “won’t have to vote again” if he wins in 2024, drawing criticism from Kamala Harris’s team, who call it a “vow to end democracy.” [Read]

Apple delays AI features, and tech earnings loom: Apple ($AAPL) has postponed AI features for new iPhone and iPad software updates to October. Investors are also awaiting crucial tech earnings reports that could influence market sentiment. [Read]

Business & Wealth

Alzheimer’s blood test shows promising accuracy: A new blood test boasts a 90% accuracy rate in attributing memory loss to Alzheimer’s, outperforming neurologists’ diagnoses. This breakthrough could revolutionize early detection and treatment access for the disease. [Read]

McDonald’s reports sales dip in Q2: McDonald’s experienced its first drop in US same-store sales growth since 2020. The downturn, driven by rising menu prices and cash-strapped consumers, led to the introduction of a new $5 value meal. [Read]

“Deadpool & Wolverine” smashes box office records: The Marvel film grossed $211M domestically in its opening weekend, setting a new record for R-rated movies. This performance places it among the top 10 biggest debuts ever, signaling a comeback for the Marvel Cinematic Universe and the US box office. [Read]

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DIGIT OF THE DAY

US Home Insurers Faced a Record-Breaking $15.2B Net Underwriting Loss In 2023, Double The Previous Year

We’re not meteorologists, but we’re pretty sure the insurance industry is feeling the heat. Last year, the US homeowners insurance sector recorded a net underwriting loss of $15.2B — its worst underwriting performance since at least 2000. This surge in losses is mainly attributed to the rising populations in disaster-prone areas, compounded by severe natural disasters, and increasing costs due to inflation.

• Between 2010 and 2020, 53% of US population growth occurred in six disaster-prone states like Texas and Florida — leading to increased volatility in the homeowners insurance market.

• Additionally, 37 catastrophic events that occurred globally last year were linked to warmer weather and resulted in losses that exceeded $1B each — with most of these being recorded in the US.

Insured out of luck: According to American Property Casualty Insurance Association’s Robert Gordon, the insurance industry is currently grappling with surging coverage demands (a.k.a. asking your insurance to pay for something) as insured losses soar. The financial strain has led insurers to either withdraw from high-risk areas or raise premiums aggressively — making it increasingly difficult for homeowners to afford insurance. While 2023 was defined by record losses, AM Best is pessimistic about the future, stating, “A return to underwriting profitability for the segment over the near term is unlikely.”

Read: US Insurers Have Been Losing Billions On Policies Since the Pandemic: Here’s How They Plan To Get Even