The world markets have been shaken by the Covid-19 turmoil. The bear has taken over the long ranging bull in a short span of time, but Bill Ackman, the American Investor and Hedge Fund Manager turned a $27 million position into a $2.6 billion during this time.
Bill Ackman is the founder and CEO of Pershing Square Capital Management, a hedge fund management company. Bill in a letter to its investors disclosed that a defensive cover, the fund had transformed a position from $ 27 million to $ 2.6 billion. Pershing Square used credit protection on high quality, high yield bond indices to capture massive profits. The value of assets increases as the probabilities of default of companies increased. As anti-virus measures hampered economic activity, corporate bond ratings fell and investors feared for the worse.
The fund was able to purchase the investment vehicles about a month ago “at near-all-time tight levels of credit spreads,” so the risk of loss was “minimal at the time of purchase,” Ackman wrote.
Although he said that “Hell is Coming” in relation to the virus and that he has warned the government for a 30 day shutdown; “Capitalism does not work in an 18-month shutdown, capitalism can work in a 30-day shutdown.” the fund after liquidating its protective bets has since used the profits to bolster investments in Berkshire Hathaway, Hilton, Lowe’s, Restaurant Brands International and Agilent. The fund founder used Twitter and an appearance on CNBC last week to predict that the coronavirus outbreak would cause economic turmoil if the US didn’t institute a 30-day shutdown. The fund has also reinstated a stake in Starbucks after selling its position in January.
During his interview he also mentioned that “Hilton is the canary in the coal mine, and if nothing is done soon it’s going to zero along with every other hotel company”. Markets plunged during this interview and saw a circuit breaker closing for 15 minutes.
The second quarter of the US Financial Markets didn’t seem any different as the Dow Jones saw a 4.4% drop (-973.65 points) on the first day of April after the White House projected a 100000 to 240000 death toll from Covid-19, the illness caused by the Coronavirus when the current infected count stands at 215000+ cases.