Can Bill Ackman Still Turn 2022 Around?

Pershing Square notched an 8 percent return in November.

(Christopher Goodney/Bloomberg)

(Christopher Goodney/Bloomberg)

With just one month left to turn his 2022 performance around, hedge fund manager Bill Ackman is getting close to the mark.

Pershing Square Holdings, Ackman’s publicly traded fund, gained 8.2 percent for November and is now down just 4.8 percent for the year.

That number represents a big comeback from the end of June. During the first half of 2022, Pershing Square lost nearly 25 percent, according to a report to investors.

Pershing Square has been in the red almost all year — a significant comedown after three years of massive double-digit gains. And in 2022’s uncertain market environment, Ackman has had little patience, as evidenced by the fact that he sold out of Netflix within months of buying it. As Institutional Investor has previously reported, Pershing Square’s biggest gains this year have come from a bet that rates would rise on the back of higher inflation.

Otherwise, Ackman has returned to investments he knows well. His best performing equity holding this year has been Canadian Pacific Railways, which he first bought in 2011, before winning a 2012 proxy battle and installing railroad honcho Hunter Harrison as its CEO. Ackman made more than a 150 percent return on that campaign, earning $2.6 billion when he sold out in 2016 to help meet the redemptions demanded by investors following Pershing Square’s heavy losses on Valeant. After Pershing Square sold out, the stock continued its upward trajectory, and Ackman decided to buy Canadian Pacific again toward the end of 2021. So far this year, the stock is up about 14 percent.

In another move reminiscent of his past, Ackman is betting that the Hong Kong dollar peg will break — a view he also took in 2011. The earlier wager was that the Hong Kong dollar would strengthen when the peg ends; now he is betting the Hong Kong dollar will weaken.

Pershing Square has “a large notional short position against the Hong Kong dollar through the ownership of put options.” Ackman tweeted on Nov. 23. “The peg no longer makes sense for Hong Kong and it is only a matter of time before it breaks.”

Asked Ackman: “If China is indeed a strong, independent sovereign, why does it need to peg its currency and that of Hong Kong’s to the U.S. dollar?”

He retweeted a Bloomberg story that explained that the dollar peg keeps Hong Kong rates higher than they need be, choking its economy. “It has had to follow the Federal Reserve and tighten at a time when it should be doing the opposite,” Bloomberg wrote.

It appears that Pershing Square is not alone in this view among hedge funds. “Bill’s trade is a smart lottery ticket and I also have it on,” Saba Capital Management founder Boaz Weinstein tweeted in response to Ackman’s tweet. “However unlikely de-peg may be, the payoff of upwards of 200 to 1 is comparable to CDS payoffs for the default of companies like IBM over the same 6 month horizon. Nothing is impossible, but only one of these is at all plausible.”