Monday, October 5, 2015

Pershing Square modifies their performance numbers with an eight day week

Pershing Square (the hedge fund associated with Bill Ackman) has a European listed closed-end fund called Pershing Square Holdings.

Pershing Square Holdings has a website on which it discloses weekly and monthly net asset value and performance.  This performance matches the returns of Bill Ackman's hedge fund.

They also disclose funds under management at Pershing Square (that is all assets under the strategy).

This is the website:

Pershing Square Holdings reports both weekly numbers and monthly numbers.

According to prior press releases the numbers were released in the following pattern.

(a) Weekly numbers were reported as per the close of business Tuesday and made public the following Thursday (except when there are holidays).

(b). Monthly numbers are reported for the close of the month two days after the close of the month.

On Friday 2 October I took a screenshot the results. Here is that screenshot.

The observant will notice that the reporting dates are 

1 September,
8 September
15 September
22 September and 
30 September.

The last reporting date should - if the pattern were continued - be 29 September. Instead they reported data for 30 September. 

That last week has eight days.

The results as reported on the 30th of September were bad. Pershing Square scored minus 12.5 percent for the month.

However they were
 worse as per 29 September than 30 September. Valeant rose 12-13 percent that day. Valeant is Pershing Square's biggest holding. The vast bulk of the book moved in Pershing Square’s favour during the last day of the month.

The rough calculation is that Pershing Square's performance was almost $800 million worse on September 29 than September 30 - which a cynic might say provides an incentive not to report September 29 results. Of course I would say that Pershing Square is being (extremely) modest about their fantastic day on the 30th of September. 

A portfolio calculation is Appendix A.  [Our estimate is a $777 million swing between the 29th and the 30th of September. The only position that is not disclosed is the size of the Herbalife short. We have a fairly accurate estimate of the size of this position but it does not matter much for this calculation.]

Pershing Square was - it seems - would normally have report a minus 16.6 percent number as a month to date number, but possibly in innocent error did not make this (rather shocking) disclosure. 

There are plenty of stories in the press about Pershing Squares bad month (see hereherehere). I know that Pershing Square is a remarkably open institution. Mr Ackman is the king of the three hour press conference. It is unthinkable that he would not tell the world just how good their day was on the 30th of September.

So I will. 

Pershing Square - my estimate - was down 16.6 percent month to date as per the 29th of September but had a miraculous day on the 30th of September and finished down a mere 12.5 percent. 

The press reported about Pershing Square's terrible month but could have equally reported about their fantastic day. Without reporting the fantastic day I suspect the press is treating the Baby Buffett unfairly.

The new footnote

There was a footnote that explains the reporting data on Pershing Square Holding's website. Here it is in text and photo...

Weekly net asset value (“NAV”) is calculated as of the close of business on each Tuesday and posted on the following Thursday. In the event that Tuesday is not a business day, the Company will calculate the close-of-business NAV as of the business day immediately preceding that Tuesday. In the event that Wednesday or Thursday is not a business day, any such weekly NAV will be posted the next business day following that Thursday. End-of-month NAV is calculated as of the close of business on the last day of the month and will be posted within two business days thereafter. In the event that month-end falls on a Wednesday, the Company will report the month-end NAV on Thursday, and not report the weeklyTuesday NAV. In the event that Wednesday or Thursday is not a business day, any such month-end NAV will be posted the next business day following that Thursday...

In summary it says in the footnote says if the month ends on a Wednesday we will not bother reporting the Tuesday numbers. 

And the photo:

If you are really observant you will note the typo in the footnote. It says weeklyTuesday without a space in the text. This was deeply suggestive that the footnote is recent because Pershing Square's presentation material is usually highly polished and without typos. 

This footnote, with its sloppy and atypical typo was almost certainly written by a junior. [As you will see the footnote has been modified within days of its appearance.]

I wanted to confirm the footnote was recent. Did they just do it to hide the fantastic day they had on the 30th of September (or a cynic might say their bad month until 29 September) or did they have it all the time?

The way to tell is to check old months.

The last time that a month ended on a Wednesday is December 2014. 

If the rule applied then we should see a data point for December 31 and no data point for December 30.

Confirming recency Pershing Square Holdings had both a December 30 and a December 31 data point. They were still on the website. Here is a picture. 

This it appears this month is the first time Pershing Square have applied the month-end-on Wednesday rule. 

A cynic might say that this is a ham-fisted attempt to hide an extremely bad month-to-date data point. However I just think someone wanted to hide the spectacularly good performance on 30 September.

But don't worry - we will report Pershing Square missing data point for you.

On our estimate Pershing Square month to date on 29 September 2019 was down 16.6%. For the month to date. And then in brilliance they had a great day and finished the month much better.

They had to muck around with the calendar not to report to you the wonderful day they had on the 30th of September. [A cynic might suggest they mucked around with the calendar to hide bad results - but Mr Ackman would not do that.]

More changing footnotes

I sent this material to the Financial Times. I copied it to Bill Ackman. I think it was also handed around fairly widely. Within a few hours of market open Pershing Square had released a press release about their new market disclosure rules.  You can find a PDF version of that press release here

The new rule was as follows:

Pershing Square Holdings, Ltd. has made two changes to its NAV reporting policies. Weekly and monthly NAV reporting will now be provided on a one-business-day lag rather than a two-business-day lag. For weeks that include a month-end NAV report, PSH will provide only month-end performance. As a result of the changes, investors will now receive more timely NAV reporting, but only one NAV report each week.
Now the company will not report weekly results for weeks in during which the month ends.

The short-lived "if the month ends on a Wednesday" rule has gone and has been replaced by another footnote - the picture of which is here... The NAV page has also been reformatted.

The month end on a Wednesday rule was absurd. If there was no reason to give the data point for a Tuesday when the month ended on a Wednesday you could argue there was no reason for a Tuesday data point when the month ended on the Monday.

That suggests yet again they changed it on the spot so that they did not have to report the fantastic data on the 30th of September. [A cynic might suggest that they did it so they did not have to report an atrocious month-to-date data point on the 29th - however Bill Ackman would never risk being so needlessly deceptive.]

Whatever: the [Pershing Square] will not report a weekly number if the month ends on a Wednesday rule is now gone. They will no longer report weekly data in any week that a month ends.

This rule also has problems which indicate it was thought up on the fly. What for instance happens when the month end occurs on a Friday? Do they not provide any results that week (preferring instead to wait to the following Tuesday)?

Pershing Square changed its rules on the fly inventing and thinly disclosing an 8 day week to hide their wonderful performance on the 30th of September. The new rules are a confused and made up to support their modesty.

So we will report again. As of 29 September 2015, a date that Pershing would normally have reported, the funds were down 16.6 month to date. And they had a great day on the 30th.

Eight days a week

For the moment though Pershing Square thinks it is okay to - without prior notice - report on an eight day week. Sure they did it so they could modestly hide the fantastic performance on 30 September. But the motivation is not the issue here.

Having an eight day week opens Bill Ackman up for allegations of deception - allegations that Bill should neutralise immediately by reporting the interim data point as originally planned.

I would expect nothing less.


And just because eight day weeks are fun I should finish with a song for Bill Ackman.

As per the Beatles: "I ain't got nothing but love babe, eight days a week".



Here are the holdings and prices as we estimate them at Pershing Square. The holdings other than Mondalez and Herbalife are from the last quarterly form.

The Mondalez holding is from recent filings.

The Herbalife estimate (which does not matter much for this calculation) is from our own estimate. It does not matter for this calculation as the Herbalife price was almost entirely unchanged on 30 September.

It is clear that Pershing Square had truly miraculous performance on 30 September. A cynic would say the month-to-date that they did not disclose (the month to 29 September) was terrible. I prefer to think of 30 September as wonderful.


CompanyTickerHoldingPrice 29 SeptemberPrice 30 SeptemberGain on 30 sep
Valeant PharmaceuticalsVRX19473933$158.08$178.38$395,320,839.90
Air ProductsAPD20549076$125.82$127.58$36,166,373.76
Canadian PacificCP13940890$138.14$143.57$75,699,032.70
Restaurant BrandsQSR38003984$34.71$35.92$45,984,820.64
Platform Specialty ProductsPAH42737394$12.06$12.65$25,215,062.46
Howard Hughes CorpHHC3568017$112.52$114.74$7,920,997.74


Hat tip to The Skeptic - and there was discussion with him via email. The core 8 day observation was his. The footnotes and their changes over time was my observation. 


RogierFvV said...

Kudos for attentive reading... however it pays to focus on the facts, not the personalities...
Simply put, Valeant may very well be a bad play... there is a lot of fallacious reasoning in pharma. The value of a life does not go to infinity as life expectancy approaches zero, yet that is what the pharma industry generally seems to assume.
Meanwhile Herbalife is still a pyramid scheme, and we are probably closer to that position paying off than ever before.
Past performance would indicate that PS knows when its time to hold 'em and when it's time to fold 'em.

Anonymous said...

You state Valeant is Pershing Square´s largest holding. This is not in fact the case John.

Anonymous said...

John, I generally like your attention to detail.

In this case though...

It really sounds like you need to spend time doing research that will help your LPs, rather than making fun of Ackman. Seriously, who cares?

John Hempton said...

To anon who thinks I am wasting my time.

a. I was paying attention only because we wanted to estimate the Herbalife short and this data is almost entirely sufficient.

b. I shorted a little of the European fund waiting for the terrible data print. I never got the print. I was annoyed. I still am.


Anonymous said...

Herbalife is a nightmare from which I am trying to awake.

Anonymous said...

Jesus get a life. Even if you wanted to short the fund, keep your obsession to yourself. you were the guy who tried to impress your ex gf when you saw her out, and she and her new dude just laughed at your tangible desperation on their ride home. Ackman's moved on, get over it.

Anonymous said...

Why don't you outline why Ackman is wrong in his new presentation, which you obviously think, comparing HLF to Vemma instead of doing this.

Anonymous said...

John Hempton is brillian, his comments are Brilliant, read the report he issued when VRX was $250.00 He has a very nice life.

Anonymous said...

Anonymous if you were 10% as smart as John is, you would make a lot of money, I dont know if you remember the first article John posted when the stock was $250.00 John is Brilliant and you are just pissed off because I think you are long wrong and want an excuse to attack John, Pitifull

abee crombie said...

Big fan of the blog, and I can see your frustration if you shorted the closed end fund ( though probably not much given the liquidity ) but can you and bill kiss and make up. Bill has done some great things ( hunter at cp, apd, helping Burger king) and you John have been a studious market observer as well from what I have read, especially on the short side.

life is too short for petty rivalrys

GlobalTrader said...

The bigger question is, how does Bronte Capital returns compared to Pershing since inception?

Roger Fritz said...


As you may know I work in performance:

We use the Lipper LANA system to provide performance for our clients. Weekly performance is provided by LANA overnight usually on Thursday evening as of that Thursday. When the first business day of the month falls on a Friday, however Lipper will not provide us with data until the following Monday. In these cases, some clients ask us to put up the month-end performance on their website. Preferring to get the data out there as opposed to waiting.

It could be a similar case here:

Whatever the case, it is likely a 3rd party is providing performance and publishing it to the website.

obelix said...

How do we find out how many shares in each of the holdings on the list Pershing Square bought on that last day of the quarter?

Anonymous said...

LOL can I ask why are you so irritated by Bill Ackman? Is it jealousy? or did he actually do something to you?

John Hempton said...

Dear Global Trader. Mine are better. Less dollars though that makes it easier.

Anonymous said...

John, what I do know is litigation can be just a game. Bill's personal financial resources may be bigger than yours.

GlobalTrader said...

You have compounded 20% for longer than he has? I have a hard time believing that

John Hempton said...

Dear Global Trader

a). Shorter time
b). More performance in aggregate since inception.

Don't believe it. True though.

guurst said...

Compliments...but do I smell some "Carthago delenda est" ?

GlobalTrader said...

a). Shorter time

well, there it is the reason

The Rioja Kid said...

Also, Bronte/Pershing is a false comparison. To be fair, you should add in John Hempton's performance at Platinum and Bill Ackman's performance at Gotham.

John Hempton said...

No Mr Global Trader - the AGGREGATE is larger than Pershing too (despite the shorter time).

that said most of it was done on very little money.

It is hard to manage $10 billion plus - and I could not have got his returns on that much money. I fully acknowledge that.

Anonymous said...

one point on returns... i think comparing return levels in completely irrelevant if you dont factor in the risk level of the investments...

altough mr. bronte is 100% fair in noting that it is significantly mire difficult to make returns with 20x capital...

GlobalTrader said...

>No Mr Global Trader - the AGGREGATE is larger than Pershing too (despite the shorter time).

Anyone with basic statistics background knows its easier to get lucky on shorter time periods

Anonymous said...

You might want to fix a few typos in this post (speaking of typos):

"Pershing Square was - it seems - would normally have report" (garbled)

"Mondalez" instead of "Mondelez"

BBINC said...

True, my understanding is that extreme results are more likely with sampling a smaller data set, however this equally means that the returns are actually understated. The sampling error works both ways.

At the end of the day the interpretation is limited by the study time / sample size, no way around that.

The PM said...

Not sure both funds have the same objectives.

ie John's fund runs loosely 50% net long. Pershing Square is somewhat opportunistic and deploys capital when it sees fit. The different net and different risk (let's say volatility as one measure, but also say correlation with being long only) can tell a very different story.

GlobalTrader said...

"True, my understanding is that extreme results are more likely with sampling a smaller data set, however this equally means that the returns are actually understated. The sampling error works both ways. "
not "equally means" at all. its easier to lag the market than to beat it

BBINC said...

OK Global Trader: I think we are at crossed purposes - my comment was simply on my understanding of the relationship of sampling error and sample size. Beating or lagging a market is a different and I understand, far more complex question.

美国 said...

Good attention to detail. Fun read. Others are clearly annoyed, which makes reading the comments even better.

William M. Connolley said...

FWIW, I saw and thought of you; it says "William Ackman’s hedge fund Pershing Square Capital Management sold approximately 5 million shares in the pharmaceutical giant Valeant International “to generate a tax loss for their investors”". Umm, that sounds like a fine reason for starting to back out of a poor investment :-)

General disclaimer

The content contained in this blog represents the opinions of Mr. Hempton. You should assume Mr. Hempton and his affiliates have positions in the securities discussed in this blog, and such beneficial ownership can create a conflict of interest regarding the objectivity of this blog. Statements in the blog are not guarantees of future performance and are subject to certain risks, uncertainties and other factors. Certain information in this blog concerning economic trends and performance is based on or derived from information provided by third-party sources. Mr. Hempton does not guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based. Such information may change after it is posted and Mr. Hempton is not obligated to, and may not, update it. The commentary in this blog in no way constitutes a solicitation of business, an offer of a security or a solicitation to purchase a security, or investment advice. In fact, it should not be relied upon in making investment decisions, ever. It is intended solely for the entertainment of the reader, and the author. In particular this blog is not directed for investment purposes at US Persons.