- Bill Ackman's Pershing Square scored a 70% return in 2020, exceeding its previous record of 58% in 2019.
- The billionaire investor's hedge fund saw its net asset value per share jump from about $27 to more than $45 between January and December.
- Ackman largely offset the pandemic's impact on Pershing by spending $27 million on credit-default swaps that soared in value to $2.6 billion.
- Pershing's bosses sold the hedge in March and plowed most of the proceeds into existing holdings that were trading at bargain prices.
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Bill Ackman's Pershing Square delivered a 70% return on its investments in 2020, breezing past the benchmark S&P 500's 16% gain for the year and surpassing its previous record of 58% in 2019.
The billionaire investor's hedge fund reported that its net asset value per share swelled from about $27 at the start of January to north of $45 at the end of December.
Pershing's outperformance partly reflects Ackman's anticipation of the pandemic's devastating fallout and the steps he took before markets tanked in March.
The firm snapped up credit-default swaps for investment-grade and high-yield bonds, which served as insurance against a wave of corporate defaults. It spent only $27 million on premiums before selling the derivatives for $2.6 billion — enough to offset the blow to its stock portfolio from the crash.
Ackman and his team promptly deployed more than $2 billion of the proceeds from their hedge into Hilton, Lowe's, and other stocks in Pershing's portfolio, capitalizing on bargain prices.
They also boosted their stake in Warren Buffett's Berkshire Hathaway to about $1 billion, only to sell it in May after the famed investor failed to deploy his conglomerate's cash hoard during the downturn.
"We have probably lost more money in Berkshire than anyone in the world," Ackman said about the position in a recent interview.
In light of Pershing's handsome return last year, Ackman won't be too broken up about his Berkshire bet.