Bill Ackman Made $4B Betting on the Pandemic’s Impact on the Economy

By: Benyamin Davidsons

Bill Ackman made billions correctly betting on the impact the pandemic would have on the economy.

As reported by the Wall Street Journal, the founder and CEO of Pershing Square Capital Management, a hedge fund management company, scored big –profiting close to $4 billion—in two complex debt investments. One was early on in the pandemic when he bet the economy would be swiftly shuttered, and now a second win predicting a bold comeback. With an investment of about $200 million, Ackman was able to prove why his is one of the biggest activist funds in the world.

Before the pandemic, the company suffered four years of hefty loses, shrinking from $20 billion to under $7 billion, due to losses associated with drug maker Valeant and supplement company Herbalife Nutrition Ltd. For Ackman, 55, it was just an opportunity to bounce back. The CEO, whose net worth is about $3.19 billion in 2022, saw his publicly traded fund gain 70 percent in 2020 and another 27 percent last year, bringing it back near the company’s peak.

Ackman’s recent success is especially impressive noting that he made a killing in a “macroeconomic” bet on global economic shifts as a whole. Usually, Ackman’s expertise is stock picking and getting the low-down on a company to invest in with the money investors entrust into his company’s funds. Mr. Ackman bet on a global response that was considered improbable—and he had even tweeted about it at the time.

First in February 2020, Ackman, went into positions which would benefit if corporate bonds lost value. He paid $27 million for the instrument and sold it just a few weeks later for $2.6 billion, when investors realized companies which had shuttered wouldn’t be able to pay their debts. He used the profits to buy beaten down stocks including Hilton Worldwide Holdings Inc., Lowe’s Cos. and the owner of Burger King restaurants, at depreciated prices. As per the WSJ, the second part of his success was the wager that business and consumer spending would rebound and interest rates would increase. He spent $177 million on options tied to Treasury bonds that would benefit if interest rates rose considerably over 18 months, and sold them before the Federal Reserve’s recent announcement regarding interest rates.

Per the WSJ, Mr. Ackman reinvested most of his winnings into Netflix, returning to his stock-picking origins. The hedge-fund manager was in the news last week revealing his purchase of 3 million shares of the streaming giant. He invested the remainder of the profits in a more modest wager that interest rates will continue rising.