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Bill Ackman is getting worried about geopolitical risk, buys protection against market drop

  • Pershing Square's Bill Ackman said the firm bought out of the money call options on a volatility index to hedge against the risk of a market decline.
  • The firm also said it bought and sold Hilton Worldwide shares at nearly a 30 percent gain, an investment revealed publicly for the first time Wednesday.
Bill Ackman
Adam Jeffery | CNBC
Bill Ackman

Billionaire hedge-fund manager Bill Ackman revealed he bought protection against a stock market drop due to rising geopolitical risk.

Ackman said the firm took a "small position" in out of the money call options on a volatility index during Pershing Square Capital Management's second-quarter conference call Wednesday.

This hedge "will protect against stock market risk," he said, specifically citing a potential conflict on the Korean peninsula.

The firm holds a quarterly conference call to update its European closed-end fund investors on the fund's investments.

The investor also revealed the firm bought and sold Hilton Worldwide shares at around a 30 percent gain. The holding's size peaked at 5 percent of the fund's assets.

"We bought Hilton Worldwide last year and exited in the last 45 to 60 days," he said. His regret was "the firm was not able to make it a large enough position."

The hedge-fund manager has become embroiled in a public battle concerning his latest activist position, ADP.

Ackman revealed on the call he raised an additional $500 million in a co-investment vehicle for the firm's ADP investment.

Pershing Square recently took an 8 percent stake in ADP. Ackman told CNBC on Aug. 4 he is seeking "transformational change" at the payroll processor. In response, ADP CEO Carlos Rodriguez said Ackman "doesn't know what he's talking about" in an interview with CNBC's David Faber last Thursday.

The hedge fund has nominated three directors to ADP's board, including Ackman himself.

Ackman has stumbled in recent years with high-profile losing bets on Valeant Pharmaceuticals and Chipotle Mexican Grill.

Pershing Square Holdings is underperforming the market this year. The fund is down 2.2 percent year to date versus the S&P 500's 10.6 percent return through Aug. 8, according to its website.