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Bill Ackman plans to raise $4bn by listing new investment vehicle

Bill Ackman is planning to raise around $4 billion by listing a new investment vehicle in London, in the latest example of a hedge fund manager looking for capital that cannot flee in a crisis.

The US activist, whose targets include Allergan and Air Products, hopes to follow in the footsteps of other hedge fund titans including Daniel Loeb and Alan Howard, who have launched "closed-end funds" on the London Stock Exchange.

Unlike traditional hedge funds, whose investors can demand their money back at regular intervals, closed end funds raise permanent capital. Shareholders that want to cash out must sell their stake on the open market to other investors.


Bill Ackman
Adam Jeffery | CNBC
Bill Ackman

Mr Ackman dropped fresh hints about his plans on Wednesday in a letter to investors in his hedge fund, Pershing Square. He did not set out the size or venue for the fundraising, details of which could still change.

"Because we are an active, control and influence-oriented investor, we have avoided being fully invested because of the risk of investor redemptions," he said, expressing frustration that returns could have been higher if he had not kept an average 14 per cent of Pershing Square's assets in cash.

Read MoreAckman's potential loss during Herbalife presentation

"We will hopefully begin to address this issue with the initial public offering of Pershing Square Holdings Ltd, targeted for later this year, which will increase the amount of capital that is permanent."

More from the Financial Times:
Ackman wagers $2.2bn on Air Products stake
Ackman to reduce Canadian Pacific stake
Ackman plans 2013 listing for $4bn fund

Mr Ackman first mooted a permanent capital raising last year, but strong performance in recent months and investor enthusiasm for activist hedge funds have encouraged him to move forward with the plan.

Activists, who take stakes in companies and agitate for strategic changes, describe themselves as long-term investors and are therefore particularly keen on locking up capital permanently to avoid having to exit positions prematurely.

Mr Loeb raised money for his hedge fund through the listing of Third Point Offshore Investors in London in 2007, the same year as Mr Howard's hedge fund group Brevan Howard listed BH Macro.

Read MoreI did not front-run Allergan stock, Ackman says

Other funds, including David Einhorn's Greenlight Capital, have raised long-term capital through the reinsurance market. They have launched companies that sell insurance and investment premium income with the underlying hedge fund.

In Wednesday's letter, Mr Ackman revealed that his main funds were up 25 per cent so far this year, after fees, and he addressed one of his most controversial investments, a negative bet against Herbalife, the nutritional drinks business he claims is a pyramid scheme.

Last month, he promised to strike a "death blow" for the company by presenting findings of an undercover investigation into its marketing practices, but the stock soared.

"While my overly promotional preview led to a public relations failure and a complete rebound in the stock price that day, we were fortunate in having attracted a high degree of attention," he wrote. "Publicity and transparency are the enemies of a confidence game."

Herbalife says Mr Ackman's allegations are not true.

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