Bill Ackman’s Pershing Square turned $27M into $2.6B via ‘large notional hedges.” The hedge fund acquired the hedges due to concern about the negative effect of the coronavirus on the U.S. and global economies, and on equity and credit markets, Ackman stated Wednesday in a letter to investors.
On March 23, Pershing completed the exit of the hedges generating proceeds of $2.6B for the Pershing Square funds, compared with premiums paid and commissions totaling $27M.
The hedges were in the form of purchases of credit protection on various global investment grade and high yield credit indices.
Pershing redeployed substantially all of the net proceeds from the hedges by adding to investments in Agilent (A), Berkshire Hathaway (BRK.A; BRK.B), Hilton (H), Lowe’s (LOW) and Restaurant Brands (QSR). The fund also purchased “several new investments,” including reestablishing a position in Starbucks (SBUX).
“The proceeds of the hedges have enabled us to become a substantially larger shareholder of a number of our portfolio companies, and to add some new investments, all at deeply discounted prices. Even after these additional investments, we maintain a cash position of about 17% of the portfolio,” Ackman told investors.