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Joe Nocera

Ackman's Investors Won't Get Their Yachts

This famous hedge-fund manager isn't looking toward the exit after two brutal years -- partly because a lot of his customers can't.
Not right now.
Photographer: Pascal Rondeau/Getty Images

One of the classics of investment literature was written in 1955 by a man named Fred Schwed Jr., a disillusioned former Wall Street trader turned children's book author. Drawing on his Wall Street experience, Schwed wrote a scathing indictment of all the ways investment advisors separated clients from their money. It was titled, "Where Are the Customers' Yachts?"

Bill Ackman's revelation on Monday that he had dumped his stake in Valeant Pharmaceuticals International Inc. after it had dropped from $260 to $11 in the space of a year and a half -- and, according to Bloomberg, cost Ackman's hedge fund more than $4 billion -- has already provoked a good deal of excellent commentary. My Bloomberg View colleague Barry Ritholtz pointed out that it exemplified Ackman's lack of consistency as an investor, while Matt Levine noted that Valeant, with its postmodern approach to drug pricing and earnings growth, was the perfect sucker's bet for a postmodern fund manager like Ackman.