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Reuters / Richard Brian
- Bill Ackman has insured his hedge fund Pershing Square against a surge in corporate defaults, after making $ 2.6 billion on a similar bet in the spring, according to the Financial Times.
- The Pershing Square chief placed the bet on Monday following the announcement of a promising COVID-19 vaccine, he told the Financial Times Dealmakers conference on Tuesday.
- “What is fascinating is that the same bet we made eight months ago is available under the same conditions as if there had never been a fire and on the probability that the world will be okay. “said Ackman.
- Ackman described the vaccine news as “bearish” because it might make people take the virus less seriously, and predicted a tough few months before the economic recovery kicks off.
- Visit the Business Insider homepage for more stories.
Billionaire investor Bill Ackman turned $ 27 million into $ 2.6 billion by insuring his hedge fund against a wave of corporate failures earlier this year. The Pershing Square chief placed a similar bet – nearly 30% the size of the original – on Monday after the announcement of a highly effective COVID-19 vaccine, he revealed at the Dealmakers conference on Tuesday. Financial Times.
“I hope we lose money on this next blanket,” Ackman said, according to the Financial Times. “What is fascinating is that the same bet we made eight months ago is available under the same conditions as if there had never been a fire and on the likelihood that the world will be okay. . “
Read more: Buy these 21 neglected stocks destined for huge gains as global vaccine hopes become reality, says Jefferies
Ackman called the vaccine news “bearish” during his opening speech, the Financial Times reported. He warned that people could become nonchalant about wearing masks and could worry less about catching or spreading the virus with mass inoculation on the horizon.
Investors are underestimating the lingering threat from the coronavirus, Ackman continued, warning of a tough few months before an economic recovery takes hold. The hedge fund boss sounded the alarm bells about the pandemic in March in a touching CNBC interview.
Hit the jackpot
Ackman’s winning idea in February was to buy credit default swaps – which guarantee the buyer against an issuer default – on high-quality, high-yield bonds.
Pershing Square spent just $ 27 million on premiums on the covers, the value of which soared to $ 2.6 billion after the pandemic increased the risk of companies defaults. Profits from the transaction offset the blow to Pershing Square’s stock portfolio when markets fell.
Read more: 8 world-class investors explain how they positioned themselves to profit from the long-awaited breakthrough of the COVID-19 vaccine – and the bets they made all year on a post-pandemic world
Ackman and his team cashed in and decided to capitalize on declining stock prices, investing more than $ 2 billion of the windfall in Pershing Square portfolio companies by March 18.
The fund increased its stakes in Warren Buffett’s Berkshire Hathaway – a position it sold a few months later – as well as Hilton, Lowe’s and Burger King, the parent restaurant brands, and also reinvested in Starbucks.
Pershing Square’s timing allowed it to benefit significantly from the market recovery that followed. The fund is up 44% this year as of Oct. 31, according to its latest portfolio update.
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