The full text of Bill Ackman's letter to investors in his Pershing Square IV fund, which invests solely in Target (TGT).
"
February 8, 2009
Dear Pershing Square IV Investor:
A few further thoughts and an update on PSIV:
In my effort to get last week’s letter out promptly, I neglected to apologize. I am deeply disappointed by PSIV’s dreadful performance and I apologize profusely for the fund’s results to date. Over the last few days, we have spoken to both investors who wish to redeem and others who intend to contribute additional capital. We expect to be able to redeem any and all investors who choose to exit in March, in full and in cash. We will provide more details on the timing of distributions shortly.
I have spent the last few days thinking about what we can do beyond strong progress on Target and PSIV to somehow compensate you for PSIV losses to date. Approximately 90% of the investors in PSIV are also investors in the main Pershing Square funds. Substantially all of the overlapping investors have a larger investment in the main Pershing Square funds than in PSIV.
For those PSIV investors who are investors in the main Pershing Square funds, we will raise the high water mark, thereby waiving future incentive fees on your main Pershing Square fund capital account(s) and any additions to your capital account(s) until such time as you have recouped your PSIV losses.
By way of example, if you invested $10 million in PSIV and have lost $9 million of your capital, your high water mark on your main Pershing Square fund capital account(s) will go up by $9 million and you will not pay any incentive fees until you have recouped your entire $9 million PSIV loss. This commitment applies even in the event you remain an investor in PSIV and your PSIV investment increases in value. If you remain an investor in PSIV and your capital account declines further in value, you will receive an additional credit toward your high water mark in the main Pershing Square funds.
For the 10% of the investors that are not investors in the main Pershing Square funds, we offer you the following: We will raise the high water mark on any future investment you make in any Pershing Square fund or co-investment vehicle we subsequently offer so you will not pay any incentive fees until you have recouped your PSIV losses.
Our willingness to offer those investors not currently in the main Pershing Square funds a fee waiver is, of course, of little value if they make no future Pershing Square investment. To their credit, some of these investors, who are for the most part other hedge funds (that comprised approximately $1.3 billion of the original $2 billion of fund capital), have told me that they previously hedged a substantial portion, or in some cases 100% or more, of their exposure to Target through PSIV. Hopefully, this has helped to mitigate their PSIV losses in the event we are never able to recompense them.
Bottom line, PSIV has been one of the greatest disappointments of my career to date. That said, we continue to believe that we will ultimately be successful in our investment in Target. I am likely now the largest individual investor in Target through my interests in the various Pershing Square funds including my personal commitment of an additional $25 million of capital to PSIV. I and the rest of the Pershing Square team will work hard to achieve a successful outcome for all of us. On the pages which follow, we have attempted to answer investors’ most commonly asked questions. Please call me if you have any additional questions.
Sincerely,
William A. Ackman"
And, here's the .pdf version for those that want it.
