Bill Ackman apologises to investors for poor 2015

Bill Ackman has written a mea culpa to the investors in his hedge fund, Pershing Square, after it suffered the worst year in its history.
The activist fund manager said that failing to sell out of Valeant Pharmaceuticals, a drug company that attracted political controversy for raising prices, was his biggest mistake of the year.
But he also struck a defiant tone, saying: “We do not believe that our investment performance in 2015 was primarily due to unforced errors, but rather due mostly to the market’s reappraisal of our holdings without a corresponding material diminution in their intrinsic value.”
Pershing Square ended the year down 20.5 per cent, after fees, with a 9.1 per cent decline in just the fourth quarter.
There were “no major new wars” and “no financial crisis” in 2015, he wrote, “so what happened?”
The annual letter to Pershing Square investors was posted on the company’s website on Tuesday night. In it, Mr Ackman said he ascribed too much so-called platform value to companies he believed would generate profits from future acquisitions, even though they looked fully valued on the basis of their existing businesses.
These platform companies included Valeant, which had grown through a string of acquisitions and planned to keep doing so until political controversy and revelations about a distributor turned investor sentiment sour.
When the [Valeant] stock price rose this summer to the mid-$200s per share, we did not sell ... In retrospect, this was a very costly mistake
- Bill Ackman
“When the stock price rose this summer to the mid-$200s per share, we did not sell as we believed it was probable the company would likely complete additional transactions that would meaningfully increase intrinsic value,” Mr Ackman wrote. “In retrospect, this was a very costly mistake.”
Mr Ackman also attributed some of last year’s underperformance to the fact that other investors follow his lead, initially boosting the share prices of stocks that he buys but also meaning that there are many short-term investors who pull out when the shares start to go south.
And two hedges that Pershing Square hoped would counteract stock market declines, bets against the Chinese renminbi and Saudi Arabian riyal, have not performed as well as hoped because the two currencies have been propped up by state intervention in the markets — “inadvisably, in our view”, Mr Ackman added.
Earlier on Tuesday it was revealed that Pershing Square had fallen out of a list of the top 20 best-performing hedge funds of all time, one year on from breaking into it.
Mr Ackman’s rapid entrance and disappearance from the annual list compiled by LCH Investments, the fund of hedge funds run by the Edmond de Rothschild group, illustrates the challenge faced by hedge funds which aim to generate consistently outsized returns without risking catastrophic losses.
“While no one here is enthusiastic about delivering our worst performance year in history in 2015, it certainly does a good job reinforcing the humility-side of the equation that is necessary for long-term investment performance,” Mr Ackman wrote in the conclusion of his letter.
“In 2016, we would like to generate results that reinforce the confidence side of the equation. Humility and scepticism will help get us there.”