Stephen Gandel is a Bloomberg Gadfly columnist covering equity markets. He was previously a deputy digital editor for Fortune and an economics blogger at Time. He has also covered finance and the housing market.

Add Bill Ackman to Bill Ackman's list of losing investments.

Earlier this year, Pershing Square Capital Management, Ackman's hedge fund firm, began buying back shares of the publicly traded version of its investment fund, essentially taking money clients gave him to invest and wagering it on himself. So far, the move looks as if it could be another blunder among hedge funds fumbling for fresh ideas. Since early May, Ackman's firm has bought more than 2.8 million shares of Pershing Square Holdings LTD, which is listed in London and Amsterdam. The share purchases cost $41.5 million. But those same shares, if they were trading today, would be worth only $38.4 million, or $3.1 million less than what Ackman paid.

Pershing's Plunge
Shares of Bill Ackman's public fund have struggled
Source: Bloomberg

That's not exactly how buybacks work. Pershing Square is retiring the shares and has no plans to trade them again. So in reality, it's not just the $3 million that is gone but the entire $41.5 million. Of course, fewer shares should, in theory, make the remaining Pershing Square Holdings shares worth more, which is the purpose of buybacks. But that hasn't been the case. Instead, they have slumped an additional 14 percent since the buybacks began. Shares of the fund, which began trading in late 2014 at the equivalent of $25, are $13.50.

It's possible that the shares would be even lower if Ackman hadn't bought some back. And he has pledged to continue to buy more, three times as many as he has purchased already, which could eventually lift their price. And the buybacks were done in pounds, which are a little stronger than they were a few months ago, lowering the cost of the buybacks to U.S. investors. What's more, the net asset value of the fund has been consistently above where the fund's shares trade, as much as 24 percent recently. So Ackman can argue that he's creating value for his fund's shareholders by buying the shares at a discount, even if in reality the shares are worth less.  

Nonetheless, the buybacks look like another high-risk move from a hedge fund manager who already pushes the limit. With corporations, buybacks in theory boost the stock price by increasing a company's earnings per share. Fewer shares equal a higher EPS. Publicly traded investment funds, though, don't have earnings, but they should still benefit from buybacks. There are just more variables. For fund buybacks to work, the value of the fund's investments have to rise, or at least not drop. And the fund itself has to hold its value. The funds of hot managers can trade at a premium. The problem is there are few big-name hedge fund managers out there right now as cold as Ackman. 

Losing Ground
Ackman has struggled to repeat his stellar returns of earlier this decade
Source: Pershing Square
Note: 2017 returns are year to date through 10/24/17.

His public fund's investments were down 1.2 percent this year as of Tuesday. And that was before Chipotle, one of Ackman's biggest holdings, announced disappointing earnings and plunged nearly $50 a share to a recent $280. This is the third consecutive year that Ackman's funds, which dropped 13.5 percent and 20.5 percent in 2016 and 2015, respectively, are in the red.

Ackman still clearly believes in himself. The market, though, clearly doesn't.  

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Stephen Gandel in New York at

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