Pershing’s stake in Berkshire was worth $688m based on its closing share price on Wednesday and represented roughly 0.25 per cent of the outstanding class B common stock. Berkshire’s shares have lagged the benchmark S&P 500 this year, down nearly 4 per cent as of Wednesday’s close.
The stock purchase has made Pershing one of the 50 largest holders of class B Berkshire shares, alongside the California State Teachers Retirement System pension fund and asset manager Northern Trust Global Investments, according to data provider Refinitiv.
Control of the company rests, however, with holders of the higher-priced A shares, which carry more votes, more than one-third of which are held by Mr Buffett himself. The sprawling Berkshire conglomerate, which includes T-shirt and underwear maker Fruit of the Loom and US rail operator BNSF, has struggled to put its mounting cash pile — now $122bn — to work, which has frustrated some investors and analysts.
Mr Buffett warned earlier this year that prices for businesses that would typically be Berkshire acquisition targets were “sky high”. It has instead started ploughing its cash back into its own shares. It repurchased $2.1bn worth of class A and B common stock already this year. Berkshire also disclosed on Wednesday it had spent money on buying more Amazon shares, lifting its stake by 11.2% to 537,300 shares. The Pershing stake in Berkshire will be a passive investment and is unlikely to become aggressive, according to a person familiar with the investment. The hedge fund manager has long admired Mr Buffett, the quintessential long-term investor, nicknamed the Oracle of Omaha. At a conference in April, Mr Ackman said he modelled his own fund after Berkshire.
“This is a business in that you learn from mentors in a way, and some of them are virtual mentors,” he told the conference. “My mentor in this business has been Warren Buffett, I’ve been fortunate to get to know him in the past five or six years, but before that, I could only read what he wrote and watch what he said.” He described Mr Buffett’s original partnership as an activist fund, which then transformed in 1969 to the public company that became Berkshire Hathaway. “I think what Mr Buffett realised in 1969 is being a long-term investor with short-dated tactical is just ultimately going to lead to a bad outcome at some point in time,” Mr Ackman said.
“Our ambition at Pershing is always to have a permanent capital structure and follow Mr Buffett, and we took a step in that direction by starting a private fund that we took public in Europe, and the long-term plan was that was going to become the majority, or perhaps all of our capital, like Mr Buffett.”
Recommended FT Magazine Warren Buffett: ‘I’m having more fun than any 88-year-old in the world’ Mr Ackman said that after listing the fund, Pershing “hit what could euphemistically be called a rough patch,” that led to investor redemptions from its private fund, making the firm more reliant on its public vehicle. “That has led to our public vehicle now is about 80 per cent of our capital,” he said. “And if we had no other capital at all, I would compare it to where Mr Buffett was in 1969.” Mr Ackman recently sold off two of the fund’s holdings, in Automatic Data Processing and United Technologies, freeing up capital for the new investment. The Berkshire holding is Pershing Square’s first new holding since it invested in Starbucks last year.
"If more of us valued food and cheer and song above hoarded gold it would be a merrier world." ~ JRR Tolkien