During Pershing Square founder Bill Ackman’s appearance co-hosting CNBC’s Squawk Box this morning, he distanced himself and his firm from the private equity industry—which has received a recent bout of bad publicity due to its connection to presidential hopeful Mitt Romney.The hot Romney issue right now is the tax rate (15%) on carried interest income, which is money hedge funds and private equity firms make from deals after expenses and investors are paid.
Carried interest is “not as a good a deal” for hedge funds as it is for private equity, Ackman told Squawk Box.
He explained that he does not pay carried interest on most of his income because of the way his fund is structured in terms of offshore and onshore money.
About 60% of his fund’s money is offshore, and “100% of the incentive fee for that we get for the offshore fund is taxable as ordinary income,” Ackman said.
For money in Pershing’s onshore funds, the carried interest tax loophole only applies to money made off assets that are held in the long-term.
The activist hedge funder said he does not know what tax rate he pays, adding that it may be affected by his charitable donations. But he did say that he was “not opposed” to reforming the carried interest rate and that hedge fund managers in general embraced comprehensive tax reform. Given increased pressure to take a look at this policy coming from both sides of the aisle, this is probably the right thing to say from a public relations perspective.
Ackman, who is prominent philanthropist, also made a big push in promoting his Harbor Investment Conference next week, which raises money for one of his biggest charitable involvements, the Boys & Girls Harbor.
“I’m going to give an idea [at the conference],” he said. “You’ll make $1500 from my idea, very low risk. It’ll pay for the whole event.”
The hosts also discussed Ackman’s role on the board of JC Penny and recent headlines he’s made trying to shake up Canadian Pacific Railways’ upper management during the show.
Here’s a clip from the interview: