Billionaire Bill Ackman Launching New Fund Should Income Investors Search Elsewhere?

Bill Ackman, a controversial yet highly respected hedge fund manager on Wall Street, is currently in the process of raising funds for a closed-end fund, Pershing Square USA Ltd. Ackman, who founded Pershing Square Capital Management in 2004, is known for his bold investment strategies, allowing him to outperform broader market indexes. He often touts the importance of value investing, pooling $16 billion under assets into just seven stocks. With 1.3 million followers on X.com, Ackman typically resorts to social media posts to garner market interest. 

Can you guess which type of investments Morgan Stanley says will reach $2.7 trillion by 2027? It even offers up to 20% APY potential to accredited investors.

Despite his hedge fund's portfolio concentration, the silver-haired billionaire delivered 27% returns last year, outperforming the S&P 500 index's 24% gains in 2023. Perhaps his most noteworthy investment play was in 2020 when he generated a 100-fold return on his initial investment of $27 million in credit default swaps in March 2020. He anticipated a global economic lockdown during the height of COVID-19, and his strategy paid off brilliantly, netting a profit of about $2.6 billion within just one week. 

Ackman's Trailing Market Performance for 2024 

Bill Ackman's portfolio only has seven stocks, and Alphabet Inc. GOOG is the only tech stock. While this paid off splendidly during the infamous tech rout of 2022, Ackman's hedge fund is trailing behind the market indexes in 2024. Thanks to the continued AI frenzy, the S&P 500 index is up 15.2% year-to-date as of June 30, while Ackman's Pershing Square Holdings is up by just over 5%. 

To revive optimism, Ackman is now taking a different approach — launching a new fund catering to institutional and retail investors alike, with a minimum investment of just $50. However, retail investors are expected to contribute only 20% of the total investment, with the majority coming from institutional investors. 

The Harvard-trained hedge fund manager has been using low fees to attract investors. He plans to charge no performance fees on the new fund's returns and no management fees for the first year. 

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Not For Income Investors

While Ackman strongly believes in value investing, his strategy does not necessarily include passive income, as none of the seven stocks in his current portfolio have a strong dividend history. Moreover, closed-end funds often trade at a discount to their net asset values (NAV) for the first few years of being listed. Thus, retail investors might be unable to liquidate their position in Ackman's new fund without incurring steep losses. 

Instead, investing in a dividend aristocrat — a company that has raised its dividend payouts for at least 25 consecutive years — might yield higher returns for the average investor. 

Realty Income Corp. 

Realty Income Corp. O, nicknamed The Monthly Dividend Company, is a commercial REIT with over 15,450 properties worldwide. The REIT is known for its monthly dividend payouts and has increased them every year for the last 26 years. 

Realty Income pays $3.16 in dividends annually, yielding 5.74% on the current price. Furthermore, the REIT's four-year average dividend yield stands at 4.72%. 

The company's financials are expected to grow significantly soon, bolstering the chances of continued dividend hikes. Analysts expect Realty Income's revenues to amount to $5.02 billion in fiscal 2024, indicating a 23.2% rise year-over-year. In addition, the consensus annual EPS estimate of $1.35 indicates a 7.1% increase year-over-year. Notably, Wall Street estimates Realty Income Corp.'s EPS to rise at a compound annual growth rate (CAGR) of 22.6% over the next five years. 

Thus, investing in dividend aristocrats like Realty Income Corp. might be better suited for investors looking to generate a steady stream of passive income.

There Are Better High-Yield Opportunities

The current high-interest-rate environment has created an incredible opportunity for income-seeking investors to earn massive yields, but not through dividend stocks… Certain private market real estate investments are giving retail investors the opportunity to capitalize on these high-yield opportunities and Benzinga has identified some of the most attractive options for you to consider. 

For instance, Basecamp Alpine Notes offers a target APY of 9% with a term of only three months, making it a powerful short-term cash management tool with incredible flexibility. EquityMultiple has issued 61 Alpine Notes Series and has met all payment and funding obligations with no missed or late interest payments. With a low minimum investment of just $1,000, Basecamp Alpine Notes makes it easier than ever to start building a high-yield portfolio. 

Don't miss out on this opportunity to take advantage of high-yield investments while rates are high. Check out Benzinga's favorite high-yield offerings. 

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