Bill Ackman scores 70% return in 2020

Published Tue, Jan 5 20219:39 AM ESTUpdated Tue, Jan 5 202111:46 AM EST

(This story is only for CNBC Pro subscribers ) Hedge fund manager Bill Ackman appears to have scored one of his best years ever in 2020 despite a volatile market rocked by a global pandemic, an economic recession and a presidential election. His Pershing Square fund netted a 70.2% return last year after a 4.6% gain in December . That performance was far better than the 2020 return of the Dow Jones Industrial Average, S & P 500 or even the Nasdaq Composite, which posted a robust gain of 43.6%. Ackman's banner year came during one of the most volatile trading environments in recent memory as Covid-19 and efforts to contain the virus led to forced business closures, travel restrictions and a recession. At the depths of the market sell-off in the first quarter of 2020, the S & P 500 fell more than 30% from its record high as traders dumped airline, retail and energy stocks en masse. Fear gripped Wall Street as traders worried about rising hospitalizations and deaths, a sharp recession and a then-uncertain vaccine time line. Ackman was one of the most vocal managers in the early days of the fight against the coronavirus. In an animated interview in March, A ckman issued a dire warning on CNBC that "hell is coming" and that shares of hotel-operator Hilton Worldwide would become worthless without decisive government intervention. "America will end as we know it. I'm sorry to say so, unless we take this option," he said on March 18. "We need to shut it down now. ... This is the only answer." The S & P 500 fell more than 5% that day and finished the month down 12.5%. Ackman explained on March 3 that the previous month he had bought a variety of credit-default swaps on investment-grade and high-yield indexes, essentially purchasing insurance on debt. That "insurance" would increase in value as the underlying assets deteriorated and spreads widened amid an economic downturn. The manager pocketed a sizable $2.6 billion on the trade that he closed on March 23. He then extended Pershing's long book as he grew more confident in an economic recovery amid a more defined government response, using some of the profits from his short bet on credit to add to an existing position in Hilton. Most recently, Ackman said he's bullish on 2021 thanks to the rollout of vaccines but is nonetheless keeping a moderate hedge on the market. "The progress of Moderna, Pfizer and the other vaccines suggests that in relatively short order the world will be vaccinated," he said on a Pershing earnings call in November. "The second half of next year is when things will start to return to normal." "We are happy to be very much long in our equity exposure, but we do think having a decent size hedge, a very lost cost hedge is prudent," he added at the time. The billionaire investor also drew headlines in the summer with his historic special-purpose acquisition company Pershing Square Tontine Holdings , the largest SPAC when it debuted in July. Ackman said in November he's on track to announce a target company in the first quarter of 2021. The SPAC, now a popular way to take companies public, has a market cap of about $4.6 billion. The SPAC may target the "mature unicorns," those more developed privately financed companies valued at more than $1 billion, according to a previous filing. The last two years, both proving lucrative for Ackman and Pershing, came after a spell of negative returns for the activist investor. By early 2018, the hedge fund's assets had been more than cut in half from their peak above $20 billion in 2015. Prior to 2019, investors may have been turned off by some of Pershing's challenges, including a $4 billion loss on its stake in Valeant Pharmaceuticals and a high-profile miss on a short bet against nutritional supplement company Herbalife . As of the end of the third quarter, Ackman's largest long bets included Lowe's, Chipotle and Restaurant Brands.

Bill Ackman, founder and CEO of Pershing Square Capital Management.

Cameron Costa | CNBC

(This story is only for CNBC Pro subscribers)

Hedge fund manager Bill Ackman appears to have scored one of his best years ever in 2020 despite a volatile market rocked by a global pandemic, an economic recession and a presidential election.

His Pershing Square fund netted a 70.2% return last year after a 4.6% gain in December. That performance was far better than the 2020 return of the Dow Jones Industrial Average, S&P 500 or even the Nasdaq Composite, which posted a robust gain of 43.6%.

Ackman's banner year came during one of the most volatile trading environments in recent memory as Covid-19 and efforts to contain the virus led to forced business closures, travel restrictions and a recession.

At the depths of the market sell-off in the first quarter of 2020, the S&P 500 fell more than 30% from its record high as traders dumped airline, retail and energy stocks en masse. Fear gripped Wall Street as traders worried about rising hospitalizations and deaths, a sharp recession and a then-uncertain vaccine time line.