That's not a fair criticism. At the time they invested, Valeant posted impressive financials with strong growth potential. Investors had no clue about the fraud occurring within the company. It was very rational to invest at that time. I don't think it's fair to say it's his fault for believing someone else's fraud.
Yet Ackman argues that index funds are destroying his and hedge fund's abilities to better govern a company. I guess the fraud was the fault of those darn index funds!
One of the things hedge funds do to justify their high management fees, is to research the companies they invest in very deeply, definitely deeper than looking at financials, often meeting with management.
A dozen or so years ago I got a call from what turned out to be Michael Dell's wealth managers. They wanted to interview me about my recent ex-employer.
Clearly their research goes much deeper than reading over the 10Q forms and annual reports.
The fraud is not so much my concern- it's the unethical business plan. Valeant is just a watered down Turing Pharma. All the while Ackman continued to grow his position.
