One "synthetic" way to get around this restriction is to buy a combination of PSH bonds (6.4% YTM) and VRX stock. The combined return of this is likely to mimic PSH returns due to the fact that the bonds don't have the asset management and incentive fees associated with its returns. Problem is that both of the bonds at IB have the Institutional Restriction. I'm not sure how one can meet the criteria. I would assume you have to be a Qualified Investor but maybe there is some other way
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IB not able to clear trades in Euronext AEB - Suspends trading
- Thread starter NoVoodooHere
- Start date
Interesting idea and it might do a decent job in the short term indeed, I suppose. Since my interest in PSH is as a core holding in some ultra-long term investment accounts, this approach will not work for me. It is however extremely annoying that this should happen at possibly the most advantageous time in a one year long campaign of averaging into a large long term position. I already have most of the position on, but, if this is not fixed by Friday... ACATOne "synthetic" way to get around this restriction is to buy a combination of PSH bonds (6.4% YTM) and VRX stock. The combined return of this is likely to mimic PSH returns due to the fact that the bonds don't have the asset management and incentive fees associated with its returns. Problem is that both of the bonds at IB have the Institutional Restriction. I'm not sure how one can meet the criteria. I would assume you have to be a Qualified Investor but maybe there is some other way
As an update I have this in from my contact at IB:
The goal is to rectify the issue and be able to make the security available for trading again. As far as when that may happen unfortunately I do not know. As more information becomes available I will certainly relay it to you at that time.
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Even for long-term I think the bonds are an interesting idea. Ackman has historically made 20% a year versus 8% of the S&P500. So, double plus a little bit. With US stocks richly valued, most 10 year forecasts are running around 3-5% a year for the next 10 years. Double plus a bit would be around 10% but the asset management fee is a larger drag on performance now. Plus hes got more assets to manage. So these 2 drags would push it to be around 8% a year with a lot of it coming from VRX. If you back out VRX his returns are likely to be around 6%, pretty much what the bond yields now. Even if he makes a bit more in the non-VRX porfolio the fact that the bonds will fluctuate 1/10 or 1/5 as the stock makes it a better risk-ajusted investment.
But you need $10M in assets to buy these bonds (the government needs to protect us from the evil hedge funds), so the idea goes to the garbage can
But you need $10M in assets to buy these bonds (the government needs to protect us from the evil hedge funds), so the idea goes to the garbage can
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It appears that this issue has been solved. I was able to send an buy order for PSH today at the AEB exchange. I am however, concerned about how big Ackman is on VRX. His option trades open a significant liability for him if the bear case plays out. I wish he had kept just the old exposure, that was easier to hedge for PSH longs
Notes... & just in time tooIt appears that this issue has been solved.
I'm glad they did, otherwise suffering through the pain of that dip w/out seizing the opportunity is of no value. IMO one should buy the fund to invest in the strategy, eg, "Ackman", if one is not comfortable w/ the whole package then one should not be interested... Noting that LT performance has been ~20% netI wish he had kept just the old exposure, that was easier to hedge for PSH longs
Problem is that he diverged from the strategy. putting 20-25% of the fund in a company levered 5-1 is just nuts and he acknowledged the mistake in the investor call last month. Right now, hes got 15%, thats more resonable but still too much for my risk apetite. VRX is either a $200 or a $0 stock. I'm not comfortable with 15% of my investment turning into confetti. So I shorted the stock to get an equivalent down to 5%. I think thats more resonable. That enables me to buy more of the fund without having to go through the extra volatilityNotes... & just in time too
I'm glad they did, otherwise suffering through the pain of that dip w/out seizing the opportunity is of no value. IMO one should buy the fund to invest in the strategy, eg, "Ackman", if one is not comfortable w/ the whole package then one should not be interested... Noting that LT performance has been ~20% net
Problem is that he diverged from the strategy. putting 20-25% of the fund in a company levered 5-1 is just nuts and he acknowledged the mistake in the investor call last month. Right now, hes got 15%, thats more resonable but still too much for my risk apetite. VRX is either a $200 or a $0 stock. I'm not comfortable with 15% of my investment turning into confetti. So I shorted the stock to get an equivalent down to 5%. I think thats more resonable. That enables me to buy more of the fund without having to go through the extra volatility
MDLZ, MCD, Burger King, those are Ackman sort of plays. VRX is more of a high risk high reward bet. It demands a smaller position
That's your prerogative. Mine is that I am giving them precious cash to invest and manage If I need to micro-manage the managers, what is the point? Better off to manage it myself and re-create only the positions in the fund I agree with, among others, making me the manager of said investments - As a trader I know better than to manage my investments myself, that simply is not for me, rather I hire the best managers available. They will have money loosing positions, to use the parlance, resulting in "permanent economic losses", that is to be accepted and welcomed, any other expectation would not be reasonable. But I shall not pretend to have the insight or capabilities to decide which is which, not my damn job in this little arrangement.
If you'll entertain the notion, Ackman/Pershing does have a history of so-called "due-diligence" positions, and size, well, you could instead buy a highly diversified fund of some sort or other... But we both know that is the opposite of what you are looking for is it not?
...That's my take, if it is of use to you great, if not oh well sounds like you have things well under control.
My investment approach is simple... 100% PSH, that is all. (junk & gambles and all)
That's your prerogative. Mine is that I am giving them precious cash to invest and manage If I need to micro-manage the managers, what is the point? Better off to manage it myself and re-create only the positions in the fund I agree with
Well, this 'solution' of yours would involve a lot more time and monitoring than mine. Its not white and black like that, there are solutions in the middle like mine