American investor and hedge fund manager Bill Ackman completed what is being called the “single best trade of all time” to net $2.6 billion in profit.
According to a report by MarketWatch, Ackman was confident in February that the coronavirus pandemic would have more of an impact on the stock market than most analysts were predicting. Ackman, founder and CEO of Pershing Square Capital Management, set up a $27 million hedge to time the bubble bursting in the equities market.
Ackman eventually chased out the hedge on March 23, catching the stock market near its bottom and netting $2.6 billion on his bearish bet.
Ackman explained the thinking behind the timing of his trade in a recent podcast with Knowledge Project.
We said, ‘You know what, we’ve got this massive position ... which maybe has the potential to double if credit spreads widen to where they were during the financial crisis. But if they don’t, and the government takes the right steps, this hedge could be worth zero, and the stock market could go right back up to where it was.’ So we made the decision to exit.
Ackman continued, saying his hedge fund used the profits to invest more than $3 billion in risk assets. Since March 23, the S&P 500 has rallied more than 25 percent, netting the billionaire investor an additional chunk of profit.
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