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Billionaire hedge fund manager William Ackman faces a crucial shareholder vote on Tuesday that will decide his months-long battle with Automatic Data Processing to get three seats on the payroll company's board.
The result could affect not just his scorecard as a corporate agitator but the amount of capital investors maintain at his firm.
A handful of investors have told Reuters they are either pulling cash out of Ackman's Pershing Square Capital Management or considering doing so after a string of setbacks on his high-profile investments.
Withdrawals and losses have shrunk Pershing Square's assets to $10 billion as of Sept. 30, less than half of what it had in early 2015 but the same amount it managed in 2013.
If Ackman loses the ADP proxy contest, dealing a blow to his efforts to make the paycheck processor and human-resources technology company more efficient and profitable, it is not clear that ADP's shares will fall or that he will sell his $2.3 billion stake.
But clients, rivals, and associates say that if the ADP bet does not work out, it could be another strike against Ackman's once-unquestioned investing prowess and could threaten outside capital housed with his firm.
"It is only so long that we can ignore poor performance," said Joelle Mevi, chief investment officer at the City of Fort Worth Employees Retirement Fund, which is invested with Pershing Square.
George Hopkins, executive director of the Arkansas Teacher Retirement System, which invests $180 million with Ackman, said his fund has not made any moves to exit Pershing Square but is not planning to add money either. Several others said they were waiting to decide whether to stay with Ackman.
To be sure, new money has also flowed into Ackman's firm as he raised $500 million in a special purpose vehicle for the ADP investment earlier this year.
Several investors met with Ackman recently as he jetted around the country on his private plane, making stops in Pennsylvania, Massachusetts, Texas, California, Illinois and other states to gather votes for his effort to win board seats at ADP and to tell his own clients that better returns are coming.
Ackman told Reuters recently he will either succeed in the proxy contest to push changes internally at ADP or he will become even more of a thorn in management's side from outside.
"I don't think we will lose," Ackman said, though he expects the vote to be close.
Even if he and his two fellow nominees do not make it onto the board, ADP management will face more pressure to perform in the next year, or possibly face a second proxy fight, Ackman said: "This sets up a dynamic that is extremely favorable to shareholders."
After unveiling his investment in ADP in August, Ackman launched a public campaign criticizing "stale perspectives" and lack of expertise within the company's executive suite.
Chief Executive Carlos Rodriguez rejected Ackman's proposals as unimaginative and called the hedge fund manager a "spoiled brat" on television. In the days leading up to the proxy vote, both sides have been ramping up public criticism. ADP declined to comment for this story.
Ackman, now 51 years old with a personal fortune of about $1.4 billion, denied that the ADP contest is about his own ego or reputation. He characterized his 35 or so activist campaigns as investments that can help workers, markets, and the broader public.
"The vast majority of my actions have been good for America," Ackman said.
Although the average annual returns for Pershing Square's core fund are 15 percent since its inception in 2004, Ackman racked up double-digit losses in 2015 and 2016 after a 37 percent gain in 2014.
Bets on Valeant Pharmaceuticals, Herbalife, and more recently Chipotle Mexican Grill have all weighed on returns. So far this year, the fund is barely in the black, compared with a 15 percent rise in the and a roughly 6 percent gain for the average hedge fund.
Because of long lockup terms in his hedge fund and because Ackman raised "permanent" capital by listing shares in 2014, there is no danger of a mass exodus overnight even if the ADP vote goes against him or the investment tanks.
But it could be a turning point persuading some investors to leave.
Mevi said her fund put Ackman on a watch list for possible firing months ago. Others who declined to be named to avoid arguments with Ackman said they are actively planning to pull funds.
"Clearly Bill Ackman is an intelligent investor who is capable of probably achieving the successes he's had in the past again," Mevi said. "But I've also had experience with managers who have not been able to repeat their home runs."