'Deals for the end of the world': billionaire Ackman prepares fund to bet against market hopes

Billionaire Bill Ackman, founder and head of hedge fund Pershing Square Capital Management, is preparing to launch a new fund that will focus on "asymmetric" deals - betting against conventional market expectations, the Financial Times (FT) reported, citing sources. The billionaire will try to repeat the success of the Pandemic times, when he turned small investments into several billion dollars.

The new fund will be an attempt to build on the triumph of "end-of-the-world deals" in 2020, which brought Eckman huge profits, writes the Financial Times. Back then, the billionaire invested just $27 million in derivatives, the value of which soared amid a collapse in corporate debt. When the chaos caused by the coronavirus destabilized the bond market, this bet provided the Pershing Square fund with a profit of $2.6 billion.

That said, Ackman is now planning to create an entirely new structure rather than pursue another "apocalyptic" deal through the main Pershing Square fund, a public company with about $20 billion in assets and a listing in Amsterdam, sources told the FT. One said the new fund would hold assets mainly in short-term US government bonds before using the capital to do large credit and macroeconomic deals similar to those that have brought success to the fund in the past.

In recent decades, Ackman and other hedge fund managers, including Michael Burry, have used derivatives for large, highly leveraged bets against corporate or mortgage bonds, the FT noted. Derivatives also allow you to play on sharp changes in exchange rates, interest rates and commodity prices, the newspaper noted.

Ackman has been thinking about launching a new fund amid this year's market volatility, which has taken Pershing by surprise, writes the FT. The company's flagship fund had lost more than 16% of its value by the end of March, according to the company's accounts.

Ackman is also preparing to take his hedge fund public, which requires demonstrating new sources of growth to potential investors, the FT notes. In private discussions, the financier has emphasized that launching an "asymmetric" strategy will significantly increase the company's fee income, the newspaper claims.

Ackman's core fund portfolio is now highly concentrated with only about a dozen positions, such as long-term bets on Uber, Google and Amazon, making it vulnerable to general stock market fluctuations, writes the Financial Times. In a listing prospectus published last month, Pershing Square confirmed plans to complement organic growth with the launch of new fixed-income funds, building on its brand recognition and experience.

In parallel, Ackman is looking for ways to realize his idea of creating a diversified conglomerate, writes the FT. He has already formed a significant stake in developer Howard Hughes Holdings, planning to turn it into a large-scale structure on the model of Warren Buffett' s Berkshire Hathaway.

In addition, the billionaire this week put forward a buyout offer for Universal Music Group, valuing the music label at around €55 billion.

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