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Bill Ackman’s Billion-Dollar Year
A big short and a big SPAC fueled hefty gains for Pershing Square in 2020.
No one in the investment world appears to have mastered the tumultuous pandemic year as well as Bill Ackman, who banked more than $1 billion in 2020.
Ackman’s billion-dollar pay day is based on the gains of the shares he owns of Pershing Square Holdings — his publicly traded hedge fund — as well as estimates of performance fees and a few private investments.
The 54-year-old hedge fund manager declined to comment on his spectacular year, saying he did not want to “gloat.”
“Happy New Year,” he added, on the record.
Pershing Square’s publicly-traded fund, now its largest, gained a net 70.2 percent in 2020, a record for the firm and multiples of the returns of the broader market and other hedge fund legends, many of whom nursed steep losses until markets began to recover from their March swoon.
Ackman owns 45 million shares, or 23 percent, of that fund, earning him $720 million on the gain in the stock alone. It gained 86 percent, including dividends, for the year.
But he's been uncharacteristically shy about his winnings. “It’s hard to talk about success when a lot of people are suffering, and many more have died,” Ackman told investors in a recent call.
The wily investor nonetheless benefited from Covid-induced market turmoil, booking a $2.6 billion gain on a short bet on CDS indexes that was based on his view that the pandemic would bring “hell,” as he put it on CNBC in early March. By late August, Ackman’s big Covid short accounted for 37 percent of the year’s gross performance of 53.6 percent, according to fund documents.
He had closed out that short in early March, then used those gains to scoop up more shares of his portfolio’s holdings when their stocks were trading near their nadir for the year.
As recently as two years ago, many had written off Ackman when most of his funds experienced their third down year. But Ackman believed in himself, pumping his own capital into Pershing Square Holdings and proving the doubters wrong.
Even veteran short seller and Ackman critic Marc Cohodes, who famously predicted that the hedge fund manager was “toast” in 2016, has had to admit grudging respect.
“I am truly impressed with his perseverance and never giving up,” Cohodes told Institutional Investor, reiterating that view on Twitter. “Staying true to yourself and finishing matters a great deal to me. Well done Bill and good luck in 2021,” he tweeted.
Pershing Square ended 2020 with about $13 billion in assets under management — almost double the amount it held at the end of 2018. Add in the $4 billion he raised in a special purpose acquisition company, or SPAC, in July, and the number reaches $17 billion.
Ackman expects to announce a merger deal for his SPAC in the first quarter and close on it soon thereafter. “Nothing we have experienced to date suggests we won’t meet our suggested time frame,” he said on the call to investors in November. Even without a merger partner, the SPAC’s stock had gained almost 40 percent since its IPO by yearend.
SPAC deal or no, it will be hard for Ackman to outdo 2020.
Pershing Square’s big year followed a record 58 percent net gain in 2019, finally putting it above the high-water mark after years of steep losses.
Another milestone occurred in December, when the London-traded Pershing Square Holdings was included into the FTSE 100, the British blue-chip index — a move that Ackman hopes will help narrow the discount of the stock price to its NAV.
Ackman told investors in November that he is “pretty bullish” about 2021 but cautious in the near term. “The next couple of months are unfortunately going to be tragic and difficult for the globe and our country in particular,” he said.
While Pershing Square remains “very much long,” Ackman said the firm had “a lot of cash on hand” and had put on another “decent low-cost hedge,” which he called “prudent.”
“The second half of next year is when things start to return to normal,” Ackman predicted.