Ackman’s bet against US Treasuries pays off with $200 million profit
2023.10.25 15:28
© Reuters. FILE PHOTO: Bill Ackman, chief executive officer and portfolio manager at Pershing Square Capital Management, speaks during the SALT conference in Las Vegas, Nevada, U.S. May 18, 2017. REUTERS/Richard Brian/File Photo
By Svea Herbst-Bayliss
NEW YORK (Reuters) – Billionaire hedge fund manager Bill Ackman, who traditionally invests in stocks, earned roughly $200 million from a bet against U.S. 30-year Treasury bonds, a person familiar with the trade said on Wednesday.
Ackman said on Monday on X, “we covered our bond short” some 12 weeks after he announced the bet on the messaging platform formerly known as Twitter.
“The economy is slowing faster than recent data suggests,” Ackman said in the post, adding “There is too much risk in the world to remain short bonds at current long-term rates.”
The Financial Times first reported news of the gain.
Stocks including Chipotle Mexican Grill (NYSE:), Alphabet (NASDAQ:) Inc, Restaurant Brands International (NYSE:), and Canadian Pacific (NYSE:) Kansas City Limited make up the bulk of the Pershing Square portfolio, which is mainly set up to benefit from equities moving higher. But from time to time, Ackman also puts on hedges to protect the portfolio.
Even as prices were moderating somewhat, Ackman in August argued that higher defense spending, energy scarcity and the transition to green energy and labor’s increased bargaining power would keep inflationary pressures high. “We continue to hedge the risk of a rise in 30-year Treasury rates because we remain concerned about the risk of higher long-term interest rates on equity valuations,” he told his investors.
The yield on the 30-year Treasuries was around 4.16% when he announced his bet against them. He said the Treasury yield, which moves in the opposite direction of prices, could rise to 5.5%.
But the conflict between Islamist group Hamas and Israel is unnerving investors and suggests Treasuries could become a safe investment option. Yields have traded off some to hover around 5.08%.
In 2020 Ackman was among a small number of investors to call the COVID-19 crisis early and put on a hedge that earned his fund proceeds of $2.6 billion early in the year.
A spokesman for Ackman didn’t respond to a Reuters request
for additional comment.
