https://www.barrons.com/articles/ho...navirus-crisis-51585147940?mod=article_inline Billionaire investor Bill Ackman announced earlier this month that he had been hedging his portfolio against market volatility spurred by the coronavirus. The bet paid off handsomely. Ackman’s Pershing Square Capital Management hedge fund laid out $27 million to buy credit protection on global investment-grade and high-yield credit indexes. The purchases, which were made late last month when credit spreads were tighter, carried limited downside risk but the potential for significant upside. Ackman said Wednesday that he finished unwinding the hedges on Monday, reaping $2.6 billion in proceeds. The hedge fund honcho has been making the media rounds recently, demanding that President Donald Trump institute a 30-day national shutdown to slow the spread of the coronavirus. He even warned that failing to act could take hotel stocks to zero. Nevertheless, he has been buying up stocks. “The proceeds of the hedges have enabled us to become a substantially larger shareholder of a number of our portfolio companies, and to add some new investments, all at deeply discounted prices,” Ackman wrote Wednesday in a letter to shareholders. He went on to note that he boosted Pershing’s stakes in Agilent Technologies (ticker: A), Berkshire Hathaway (BRK.B), Hilton Worldwide Holdings (HLT), Lowe’s (LOW), and Restaurant Brands International (QSR). He also bought shares of Starbucks (SBUX) after exiting his position in January. Still, the fund maintains a 17% cash position, which will allow it to nibble at new opportunities and stay nimble while markets remain volatile. Pershing Square Holdings (PSH.Netherlands), a publicly traded vehicle that closely tracks the main fund’s performance, was up 0.2% through March 24, having gained 7.9% in March. The firm also got a boost from Wednesday’s rally. Ackman also said that his Pershing Square Foundation made an investment in a United Biomedical subsidiary called Covaxx, which is making antibody testing kits to detect those who have been exposed to Covid-19 even if they didn’t experience symptoms.
He should of just bought SPY puts and he would have made 10 billion. So annoying when hedge funds think they are smart and use default swaps on credit indexes.
I suspect the premium was too high for them since puts are generally always priced higher. Have you done the math?