Bill Ackman is reviving the “doomsday” trading strategy that generated billions in profit during the pandemic, preparing a new fund to bet on investor complacency after his primary fund stumbled more than 16 percent this year.
Ackman’s Pershing Square is in discussions to launch a new vehicle dedicated to making “asymmetric” wagers against the market’s prevailing narrative, according to people familiar with the matter. The strategy would echo the firm’s 2020 trade, where a $27 million investment in credit derivatives returned $2.6 billion as corporate debt markets seized up.
The move to launch a separate fund for these contrarian bets follows a difficult start to the year for Pershing Square’s main $20 billion fund, which was down over 16 percent through March. The new fund would keep most assets in short-term US debt, deploying capital for large-scale credit and macro bets, a structure intended to turbocharge fee income ahead of a planned IPO that seeks to raise between $5 billion and $10 billion.
This initiative is a key part of Ackman’s strategy to demonstrate new growth avenues to potential investors before taking his hedge fund company public. By separating the high-risk, high-reward trades from his main fund’s concentrated long-term equity positions in companies like Uber and Google, Ackman is creating a hedge against his own portfolio’s sensitivity to equity market swings.
The strategy harkens back to some of Ackman’s most famous trades. During the 2008 financial crisis, he turned a $60 million bet on the bankrupt mall operator General Growth Properties into a $3.6 billion windfall. The new fund will similarly use derivatives like credit default swaps to make highly leveraged bets against corporate bonds, currencies, or interest rates.
The new fund is just one component of Ackman’s broader ambition to build a diversified conglomerate modeled after Berkshire Hathaway. He has used property developer Howard Hughes Holdings as a vehicle for this enterprise, recently acquiring a property and casualty insurer. Ackman also recently made a bid to take Universal Music Group public through one of his blank-check companies.
This article is for informational purposes only and does not constitute investment advice.
