Bill Ackman posted a record return in 2020 in his recent letter to investors last month, March.
Bill Ackman, is the founder and CEO of Pershing Square with 13.1 billion US dollars under management. The billionaire hedge fund manager is on the radar again with a record-beating 70% return in 2020. Bill Ackman’s Pershing Square fund implements an activist contrarian strategy style, which aims to achieve alpha returns by outperforming the indices.
“The billionaire hedge fund manager is on the radar again with a record-beating 70% return in 2020”
WEALTH TRAINING COMPANY
2020, known as the year of the pandemic for many provided a tailwind for Bill Ackman’s Pershing Square. Indeed, Bill Ackman is doing a victory lap as investors recently discovered to their delight that the hedge fund bagged a 70% return in 2020.
With global lockdowns spreading like wildfire and financial markets on the receiving end of massive liquidity injections the pandemic bets paid off big time and the likes of Bill Ackman posted record return in 2020.
So, while small medium-size businesses, particularly in retail and travel struggled to stay afloat, during the great lockdown pandemic, with many kept alive at the mercy of central bank liquidity, Bill Ackman posted a record return in 2020. Footnote, stay tuned as collectivization 2.0, which could take off in 2021, as the retail apocalypse accelerates with 80,000 store closures expected in 2026.
But without further ado here is the take away of Bill Ackman’s recent letter to investors.
“80,000 store closures expected in 2026”
WEALTH TRAINING COMPANY
Pershing Square scored a 70% increase in net asset value including dividends in 2020, notching the best annual return in its 17-year history, wrote Bill Ackman
So, Bill Ackman posted a record return last year with investors earning a 15-fold investment gain in 17 years, which is an amount far greater than they would have earned in a zero-cost S&P 500 index fund during that period, according to Bill Ackman.
“Bill Ackman’s pandemic hedge last spring, impeccably timed, entailed $27 million on credit-default swaps (CDS), which he later sold for $2.6 billion weeks later” – Wealth Training Company
Bill Ackman’s pandemic hedge last spring, impeccably timed, entailed $27 million on credit-default swaps (CDS), which he later sold for $2.6 billion weeks later. Bill Ackman’s Pershing Square credit-default swaps deal accounted for 45% of Pershing’s net gain in 2020
A credit default swap (CDS) is a financial derivative or contract that allows an investor to “swap” or offset his or her credit risk with that of another investor. So, if a lender is worried that a borrower is going to default on a loan, the lender could use a CDS to offset or swap that risk.
Bill Ackman posted record return in 2020 was also partly due to the fund investing more than $2 billion into beaten-down stocks during the 2020 early stock market crash. Buying heavily discounted stocks account for 25% of Bill Ackman’s profits in 2020.
Bill Ackman also addressed the push for environmental, social, and governance (ESG) standards for corporations in his letter. He argued that “philanthropy alone cannot save the world,” governments can’t be relied on to solve all the problems either, and capitalism is “far from perfect”.
Bill Ackman pointed to Agilent, Lowe’s, Starbucks, and Chipotle as four companies making in Pershing’s portfolio making strides towards greater sustainability.
So, Bill Ackman posted a record return in 2020, but who was on the losing end of the CDS trades? A question worth asking in a zero-sum game.