As we reported back in January 2018 in a article entitled, Bill Ackman’s restructuring lay-off plan which entailed firing 18% of his workforce and cut other overheads and doing more hands-on research and less stage work with the aim of reversing three consecutive years of losses.
In 2017, Pershing lost 4 percent while the S&P 500 gained 21.8 percent. Moreover, the fund lost 20.5 percent and 13.5 percent in 2015 and 2016, respectively.
The billionaire activist investor’s restructuring lay-off plan has paid off and Bill Ackman posted record profits in 2019
Indeed, Bill Ackman’s Pershing Square sizeable 58.1% profits last year means the Bill Ackman has won the heavyweight world title of most profitable hedge fund last year.
“In 2017, Pershing lost 4 percent while the S&P 500 gained 21.8 percent”
As reported in a previous article, 2019 was a challenging time for the industry where passive, index investing strategies outperformed active investing strategies.
With the average return for hedge funds last year being in the high teens, and the S&P returning nearly 30% many hedge funds are struggling to stay relevant and justify their large management fees.
“Bill Ackman’s Pershing Square assets stand at $7.4 billion”
Bill Ackman posted record profits last year, which is evidence that the hedge fund industry is not doomed or Dinosaurs in the past
Bill Ackman’s Pershing Square is likely to survive an industry shakeout.
The average return for hedge funds last year was 18.3% return, data from Hedge Fund Research shows. But the S&P Index performed almost 30% last year. So for a hedge fund to survive it needs to outperform the Index to justify hefty management fees. The average hedge fund is performing below the Index average and if this trend continues I expect many hedge funds to shut up shop as they get hit with redemption requests.
Bill Ackman’s Pershing Square assets stand at $7.4 billion and he will be able to charge performance fees again.
“Chipotle Mexican Grill (CMG.N) returned a whopping 72% over the last year”
Bill Ackman posted record profits last year and this was partly due to some big winners
Chipotle Mexican Grill (CMG.N), which returned a whopping 72% over the last year with a new chief executive and has been in the fund for years.
Moreover, Engagement at Starbucks (SBUX.O), bought in late 2018 and up 40% in the last year.
Bill Ackman posted record profits, but investors also need to keep in mind that past performance is no indication of future performance
Put another way, poor performers can also be best performers in the following year. So when Bill Ackman made three consecutive years of losses, a winning year was due.
Success in this game can sometimes also be down to randomness.
Even a broken clock is right twice a day.