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How Bill Ackman Sources New Investment Ideas

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How Bill Ackman Sources New Investment Ideas

A big part of being a successful money manager or any other type of manager is surrounding yourself with a capable team and delegating responsibility based on the individual strengths and weaknesses of the team members. Few of the world's billionaires would say they got there all by themselves.

How Bill Ackman Sources Investment Ideas

Billionaire activist investor Bill Ackman recently joined the Knowledge Project with Shane Parrish and discussed a wide range of topics, including where he gets new investment ideas.

Ackman said in the early days of Pershing Square Holdings Ltd, he would come up with investment ideas and his team would help me analyze them.

“As the business has matured, and I really think it’s a credit to the team and the maturity of the business, many ideas are sourced from members of the team,” Ackman said.

“I’m usually the 20% person on every idea. So 80% of the work is work led by a two-person subset of the investment team, and 20% of the work — reading public filings, conference call transcripts--work that I do, the 80% work, a lot of that will involve conversations with experts to understand natures of businesses, and that’s work that’s largely done by other members of the team. And then the team overall discusses whether something merits inclusion in the portfolio.” 

Pershing’s Teams

Ackman said his teams are composed of several different Pershing members with varying degrees of familiarity with a potential investment idea.

“A couple of people work very, very hard and devole a lot of the last couple of months looking at an idea. One person, myself, that’s spent not nearly as much time but knows enough to be dangerous, and then call it another four members of the team that have not done real work on the idea but are economically incentivized to make sure that we make the right decision,” he said.

Ackman said this recipe often results in Pershing understanding an investment idea even better than the people running a company, which is likely the driving force behind his history of activism.

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Image source: CNBC appearance.

 

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