The Street’s Eric Jackson got to hear a speech given by hedge fund manager, Bill Ackman, last week (he doesn’t say where) at the Active/Passive Investor conference.
Ackman is the activist investor who recently made a fool out of Hovde Capital for criticising his huge stake in General Growth Properties.
“I think most investors overdiversify because they’re lazy,” he said during his speech. He’s talking about other large investors, like him.
“They haven’t done enough research into any of their companies. If they’ve got 200 positions, do you think they know what’s going on at any one of those companies at this moment?
“As a result of overdiversification, their returns get watered down. Diversification covers up ignorance.”
It’s not surprising that he would criticise heavy diversification.
Ackman, of course, takes big stakes in companies like Target (TGT) and then gets on the board to help guide the company.
In an interesting aside about the role Pershing Square plays on companies’ boards, Ackman said:
“Many investors in Target told us after that they wished they could have voted for two of our nominees instead of either our nominees or Target’s.”