Bill Ackman’s grand imaginative and prescient unravels | Invesloan.com

One scoop to start: hedge fund Elliott Management has told investors that Nvidia is in a “bubble”, and the artificial intelligence technology driving the chipmaking giant’s share price is “overhyped”.

In today’s newsletter:

• How Bill Ackman’s $25bn IPO dream fell to earth

• Asset managers fret over lost gains

• How to invest in a classic car (without crashing your finances)

Pershing Square USA’s week to forget

Bill Ackman descended on downtown Omaha in early May for what UBS billed as a “special fireside chat”. 

It was an opportunity to get Ackman and his partner Ryan Israel in front of the kinds of investors who had stuck with Warren Buffett for decades, investors who might be interested in the pair’s soon-to-be listed closed-end fund, Pershing Square USA.

The following day, Buffett himself would be taking the main stage across the street, with tens of thousands of Berkshire Hathaway shareholders — not to mention corporate chieftains including Citi’s Jane Fraser and Apple’s Tim Cook — flying in for the Oracle of Omaha’s annual general meeting. 

An adoring crowd met Ackman at the UBS event. The billionaire would later say that he hoped to one day have an annual meeting in the same vein as Buffett’s: drawing large crowds and having the floor to wax on business and investment. 

In characteristic boldness from Ackman, he planned to do it through one of the largest ever public listings — with plans to raise $25bn through Pershing Square USA — a lofty ambition for any company, let alone a fund whose structure has fallen out of favour with investors. 

But the billionaire investor wanted to make Pershing Square USA a huge player in US capital markets. The fund could act as an anchor investor to another Pershing vehicle which would help companies like SpaceX and Stripe go public, while throwing its weight behind undervalued large-cap companies. 

The public listing of the US vehicle was also part of a bigger scheme. It would be a precursor to an eventual blockbuster IPO of Ackman’s hedge fund — Pershing Square Capital Management, the entity that would manage his other funds — as soon as 2025.

Last week the IPO of Pershing Square USA suffered a startling series of setbacks. The company slashed its fundraising target from $25bn to $4bn and then finally to $2bn — before yanking it entirely. 

In this must-read piece, my colleagues Costas Mourselas, Amelia Pollard and Eric Platt bring you the inside story of how Ackman’s grand vision came crashing down.

Investor cash piles up on sidelines

The second-quarter earnings season is drawing to a close and one clear theme stands out. Top asset managers are struggling with investor reluctance to embrace risk and put money into the markets, as interest rates and yields on cash savings remain at their highest level in more than a decade.

Investors have been stubbornly sitting in cash, hurting bottom lines for asset managers and forgoing gains on more than $1.5tn during a record bull run that until recently pushed markets to all time highs, writes Madison Darbyshire in New York. 

Several factors are driving the caution. Risk-free yields are outpacing inflation for the first time in decades. A narrow stock market riding high on a handful of volatile tech stocks, widespread geopolitical conflict, poor economic sentiment and an uncertain US election are all keeping investors firmly on the sidelines.

More than $6.1tn is held in US money market funds where investors can earn about 5 per cent on their cash with little risk, according to the Investment Company Institute, up from roughly $4.5tn before the US Federal Reserve began to raise interest rates.

It is estimated that investors have missed out on $225bn in stock market gains on $1.5tn in so-called excess cash as markets charged ahead this year. The S&P 500 is up more than 15 per cent since the start of the year. That cash earned roughly $75bn sitting in money market funds over the same period. 

“Five per cent yields in cash have kept many investors overweight in cash . . . [but] those waiting in cash would have missed out on a broad stock market returns of more than 26 per cent over the past year, including 17 per cent so far in 2024,” Larry Fink, chair and chief executive of $10.6tn asset manager BlackRock, said following his firm’s earnings last month. 

Investor reluctance to put cash to work has tested asset managers, who rely on management fees for invested capital and are in constant competition for assets. The excess in uninvested savings potentially translates to billions in lost fee income for the asset management industry.

Chart of the week

For those with even a passing knowledge of automobiles, classic cars conjure up images of sexy, curvy Ferraris, or perhaps an Aston Martin DB5 from a James Bond film, writes Alan Livsey in London. But a 1987 Ford Sierra, really? Yes, a rare Cosworth RS500 model sold at auction early last year in Coventry for £590,000. 

One has to wonder whether the new owner will see that price again. Most Sierra RS 500 Cosworth models have gone under the hammer at less than a fifth of that value. 

And there you have it: the erratic, emotional nature of the classic car market — one that, it must be said, can be tricky for the average buyer to steer through. 

To be fair, any auction can lead to silly transaction prices. In fact, the values of classic cars — the truly collectable models — tend not to vary so radically in a given year. But, as with any collectable asset, a car’s unique qualities and its scarcity can make a huge difference not only to the price but also whether one can sell it, if desired. Plus not every collector wants to trade in his or her car, happily driving it now and again. 

Alan says he likes a fast, pretty car as much as the next person. But digging into savings to pay perhaps £1.5mn for a Ferrari 275 GT Spyder requires a bit of thought first. Here are some guidelines of engagement.

Five unmissable stories this week

French insurer Axa has entered exclusive talks to sell its investment management arm to BNP Paribas for €5.1bn in a deal that would create one of the largest industry players in Europe.

Four of the largest private capital groups — Ares, Apollo, Blackstone and KKR — deployed more than $160bn in the latest quarter as they ramped up investment ahead of an expected full-throttle revival in dealmaking.

Former Aviva executive Jason Windsor is in pole position to become the next boss of Abrdn following the departure of Stephen Bird, and his appointment could be named as soon as this week. 

Phoenix Group, the UK’s largest savings and retirement business, has teamed up with FTSE 100 asset manager Schroders to launch a venture to channel more pension money into fast-growing private companies.

St James’s Place reported larger profits and attracted more money from customers than expected in the first half as it set out plans to slash costs, sending shares in the UK’s largest wealth manager up 20 per cent.

And finally

School’s out for summer. If you’re wondering what and how to read on the beach this August, our columnist Janan Ganesh has a few ideas. The golden rule is to embrace the filtering effect of time and read as few contemporary books as possible. I am taking a break for a couple of weeks. This newsletter will be back for the autumn term on September 2. Until then . . . happy holidays.