It’s a New Year for Bill Ackman

Last year, Pershing Square tempered its losses with a $2.7 billion gain on interest rate hedges.

Bloomberg/ Christopher Goodney

Bloomberg/ Christopher Goodney

Bill Ackman’s Pershing Square may have just had its fourth-worst year since it got off the ground in 2004 — but it’s starting 2023 in turnaround mode.

Pershing Square Holdings has gained 7.2 percent for the year as of February 7. All of the stocks in its closely held portfolio were up at that time, according to the firm’s annual presentation to investors.

Even the shares of Fannie Mae and Freddie Mac, the now-government owned mortgage giants that Ackman is still hoping will eventually return to the public markets, have bounced back from a disastrous 57 percent decline in 2022 (and a tiny portion of the hedge fund’s holdings). According to Pershing Square’s presentation Thursday, those stocks were up 32 percent and 31 percent respectively this year as of February 7.

It’s still very early, of course, but so far none of the losers have made up the losses from last year — nor has Pershing Square.

Ackman’s publicly traded hedge fund fell 8.8 percent in 2022. It outdid the S&P 500 index by 930 basis points, but fell short of the FTSE 100, which was down only 6.5 percent in dollar terms. (Pershing Square Holdings, which is traded in London, joined the FTSE 100 in December 2020.)

Pershing Square Holdings stock, however, fared worse. Its total shareholder return was a negative 14.6 percent, a reflection of the huge discount to net asset value that continues to dog it.

On the plus side, Ackman cut his losses last year with an interest rate hedge that netted his hedge funds $2.7 billion in realized gains — adding 14.2 percentage points to the Pershing Square Holdings portfolio. The interest rate hedging program, which involved two separate two-year swaptions and a 10-year swaption — short for swap option — has so far earned Pershing Square more than four times the capital invested, according to the presentation.

Restaurant Brands, which added 1.3 percentage points, and Canadian Pacific, adding 0.4 percentage points, were the only two stocks that were up last year.

The biggest detractor was Lowe’s, which contributed to losses equaling 4.7 percent, followed by Netflix, for a 3.9 percent loss to the fund that occurred when Ackman quickly dumped his stake following an earnings miss. Chipotle Mexican Grill came in third, with a 3.3 percent loss.

So far this year, Chipotle has been the biggest gainer in Pershing Square’s portfolio. Its shares had increased 24 percent by February 7, compared with a loss of 21 percent in 2022, according to the presentation. However, a lackluster earnings report has since caused the stock to drop sharply, although it’s still up about 15 percent for the year.

In his presentation to investors, Ackman focused on his funds’ ability to outdo markets in times of downturns. For example, in 2008, Pershing Square LP (a predecessor to Pershing Square Holdings) lost only 13 percent, compared to a 37 percent drop for the S&P 500. Since 2004, Pershing Square funds show a 15.9 percent annualized return, compared to 8.9 percent for the S&P 500.

Pershing Square Holdings, which was launched in 2012, hasn’t done quite so well, as it endured four years of brutal losses between 2015 and 2018. Even so, since 2012 it has managed to almost match the S&P 500, gaining 12 percent annually, compared with a 12.5 percent for the S&P 500 during the same time period.