Hedge fund manager Bill Ackman has taken major losses this year. From a new report by Institutional Investor:
Bill Ackman’s Pershing Square Holdings fell 9.5 percent in June and is now down 26 percent for the year, as investors’ fears of recession outweighed concerns about the inflation Ackman has been inveighing against since last fall.
Pershing Square’s three biggest stock holdings are down more than the market. Through June, Universal Music Group is down almost 23 percent, Lowe’s Companies fell more than 32 percent, and Chipotle Mexican Grill is down 25 percent.
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He is now significantly underperforming both the S&P 500 and the HFRX Global Hedge Fund Index.
Ackman’s fund had $18.48 billion under management at the beginning of the year. This 26% drop means a loss of approximately $4.8 billion.
In addition to his stocks falling, Ackman also made a large bet that short term interest rates would increase. When they fell on recession fears, he took substantial losses.
Ackman is still betting on higher short term rates. This could expose him to further huge losses.
Ackman is predicting 4-5% interest rates, but markets disagree.
Markets expect short term interest to go no higher than 2.5% next year. Ackman is forecasting 4-5%.
Longer-term inflation expectations are also modest. This could mean less need for rate increases.
The 5 Year Breakeven Inflation rate measures inflation expectations over the next five years. Today, it sits at just 2.51%.
Perhaps Ackman will be proven right in time. But as he nurses this big loss, he’d do well to remember these (perhaps apocryphal) words:
“The market can remain irrational longer than you can remain solvent.”
John Maynard Keynes
What do you think of Ackman’s big stumble? Leave a comment at the bottom and let me know.
More on markets:
New Law Could Put Big Short Sellers on the Endangered Species List
AMC Fails to Deliver Pass 2.6 Million in New Report
Why the Stock Market’s Inflation Worries Don’t Make Sense
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Photo: Bill Ackman
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