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 shareholders.
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
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 Ackman.
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
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.