The Benevolent Hedge Fund Manager

Just as the hedge fund industry faces tighter regulation and higher taxes, one fund is hoping to appease critics by going the socially responsible route.

William Ackman and his activist hedge fund Pershing Square Capital announced in an S.E.C. filing Monday that they have taken a 9.6 percent stake in Target. The filing confirmed the rumors that drove up Target's share price last week.

Ackman's recent targets include McDonald's, Ceridian, and Wendy's, where he pushed for the company to divest its Tim Hortons unit in an effort to increase profitability. According to the regulatory filing on his Target stake, Ackman believes the retailer has a strong management team but its stock is undervalued.

But in a new twist to hedge fund investing, where the focus is all about generating returns for shareholders after taking a big bite out of their profits, Ackman will donate one-third of its net gain from the Target investment to a newly formed charitable organization called the Pershing Square Foundation.

This is the first such donation for the hedge fund manager, and few details have been disclosed on the foundation. The S.E.C. filing describes it as "a charitable foundation focused on supporting charitable endeavors including, among others, education, global health care, environmental conservation, human rights, free speech, inner city economic development and advancement, social entrepreneurship and peaceful coexistence initiatives, or to other charitable organizations that are qualified under Section 501(c)(3) of the Internal Revenue Code."

Inner city economic development? One can just picture a thriving, new, urban commercial strip populated with locally owned franchises like McDonald's and Wendy's, anchored by a bustling and shiny Target.

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