While nobody could really have guessed that an outbreak of coronavirus would start in China towards the end of 2019, or that it would have spread across the world and caused so much chaos, hedge fund manager Bill Ackman has suggested differently.
He has recently claimed that his firm made a total of $2.6 billion (£2.2 billion) by betting that the coronavirus outbreak would cause a market crash. This comes just one week after he took aim at US companies, claiming that “ hell is coming”.
Ackman proceeded with taking advantage of the turmoil in bond markets in order to make almost 100x his original outlay of $27 million on bets on market movements, he claimed on Wednesday. Speaking via a post on the Pershing Square Capital Management platform, he said that the returns he made were claimed by buying “credit protection on various global investment grade and high- yield credit indices”. In doing so, he protected his fund from steep stock market falls which were occurring at the time.
It was on Wednesday, March 18 that Ackman sent a Tweet out, claiming that President Trump should “ shut down the country for the next 30 days ” and also proceed with closing the borders. Speaking with CNBC, he also went on to state that companies should halt share buybacks at the same time, in order to preserve cash.
Ackman Cashes In Despite Mass Business Closures
COVID-19 has forced businesses around the world to close down, from restaurants and hotels through to casinos and electrical stores. Yet, this hasn’t stopped Ackman from making money, thanks to the fact that he wagered on there being a market crash. Pershing Square proceeded to unwind its bets on that crash just five days after he gave his warnings to US businesses. The fund then utilised that money so as to buy shares in large companies, including the Hilton hotel chain and Starbucks coffee chain.
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Speaking in the same web post on Wednesday, Ackman said that his firm became “increasingly positive on equity and credit markets last week, and began the process of unwinding out hedges and redeploying our capital in companies we love at bargain prices…”.
If that profit is confirmed, it would rank as one of the most profitable trades to have ever been disclosed by a hedge fund. It echoes a similar trade with funds run by John Paulson during the global financial crisis that occurred a decade ago. That made a reported $15 billion against the US housing market, providing him with fees of $3 billion.
