In one corner was Carl Icahn, the iconic grizzly bear of hedge
funds who, at 76, still instills fear in boardrooms ever since
he shot to prominence in the 1980s as the U.S.'s foremost
corporate raider. In the opposite corner was 46-year-old
William Ackman, sporting his trademark head of slick white hair
and appearing cool and collected.
|| Phone foes: Carl Icahn (top) and Bill
Photo credit: (Bloomberg)
Ackman, head of Pershing Square Capital Management, was all
polish, his delivery measured and even-toned. Icahn's rants by
contrast were long-winded riffs bordering on stream of
consciousness reflections laced with profanity. If the New
York-born Jew hailed from the South, his manner of speech would
be called "down home."
For about an hour, the two activists - Icahn mostly -
sparred and jabbed verbally, mesmerizing CNBC viewers with Wall
Street's version of reality TV. Yet, despite their apparent
differences, Icahn and Ackman share not a few common attributes
as hedge fund activists.
In some ways, Ackman seems like a younger version of Icahn,
given their investment styles and focus. Both spend the bulk of
their time targeting activist situations, and on occasion
ginning up publicity where they see fit. Unlike most hedge fund
managers, both are media savvy in their opportunism.
They both prefer to own a very small portfolio of stocks.
For example, last year Icahn owned long investments in 16 or 17
different companies, while Ackman owned nine longs, according
to regulatory filings. This does not include shorts, such as
Herbalife, which may not show up in regulatory filings for the
Both appear more comfortable investing in brand name
companies with high visibility. Ackman's third quarter holdings
included J.C. Penney, Burger King and Procter & Gamble.
Icahn owned shares of Navistar, Oshkosh, Take-Two Interactive
and Hain Celestial.
Like Icahn and other activists, Ackman will frequently
agitate, badger or sometimes bully his target into making
significant changes to its business - usually calling for the
sale of key assets or an outright sale of the company. In that
respect, they're no different from other investors who seek
some quick return from, say, a big one-time dividend payment to
Perhaps the biggest difference is that many of Icahn's most
successful investments have been in biotechnology, a sector
that Ackman has mostly avoided. Icahn's spotting of drug maker
ImClone Systems was particularly successful.
Asked for comments, Icahn disagreed with these comparisons.
He says when he and his team take control of companies, they
have little to do with day-to-day management or micro
decisions, suggesting that his nemesis tends to play that role.
Icahn cites an investment he made in Las Vegas hotel and casino
Stratosphere in the past decade, where he quadrupled his $300
million investment in five years. He also combined a cluster of
oil companies that he bought out of bankruptcy from 2000 to
2005 and scored a five times return when he sold them to
Sandridge Energy for $1.5 billion.
"We do what we are good at - financial structuring and being
sure the numbers are coming in properly," Icahn maintains. "If
not, we find out why. And if we are not satisfied we bring in a
new CEO. We never become a second CEO." Another dig at
Icahn, who controls Icahn Enterprises, a $6 billion-market
cap, publicly traded company housing most of his investments,
also questions Ackman's penchant for taking very large stakes
in companies - as Pershing Square has done with J.C. Penney or
with Target several years ago. He says it makes Ackman
vulnerable if his firm faced a rash of redemptions: "We would
not concentrate as much capital as he does unless you have
enough permanent capital to back it up." (Ackman did not
respond to requests for comment.)
Ultimately, investors really care only about one thing:
returns. By that measure, Ackman and Icahn are pretty far
apart, according to our analysis covering eight years starting
2005. That was the year Ackman launched Pershing Square
International (Pershing Square LP was established the prior
year) and it was the first full year of operation for Icahn
Partners. (Icahn closed down his hedge fund to outside
investors in the middle of 2011. Nonetheless, we include
returns for the past two years).
From the analysis, Ackman clearly delivered better returns
than Icahn. His average annual return is slightly less than 18
percent, versus 12.75 percent for Icahn. In dollar terms, for
instance, if you invested $100 with each of them on January 1,
2005, you would have $342 if you gave it to Ackman or $223 if
you sent it to Icahn.
One of the major reasons for the difference is that Icahn
suffered one big loss year - he was down more than 35 percent
in 2008. Ackman had two losing years, but both were of lesser
magnitude. Although Icahn outperformed Ackman for the past two
years, Ackman outperformed Icahn in five of the six prior
The returns numbers cited here do not include Icahn's huge
gains from Stratosphere and the energy companies he sold to
Sandridge. Ackman's numbers also do not reflect his astounding
$1.8 billion loss in Pershing Square IV, a separate hedge fund
he created several years ago to invest solely in Target, when
its stock fell 90 percent in 2009.
If these investments were included in the main funds of the
two investors, their returns would be much closer to each
other, something Icahn was quick to point out.