The $2.6 billion pandemic hedge: lucky or good
Supported The win is documented: $27 million of premiums returned $2.6 billion, fully exited on March 23, 2020, and Pershing Square returned 70 percent for 2020. On the lucky-versus-good question, JMM finds a good decision made inside a lucky window: the rationale predates the crash, and the exit before the recovery was timing fortune.
Show 5 supporting points
- Pershing Square paid $27 million in premiums and commissions and realized $2.6 billion when it fully exited the hedges on March 23, 2020, roughly a 96-times return on the outlay.
- The proceeds offset the mark-to-market losses in the equity portfolio, and the firm redeployed substantially all of the net proceeds by adding to Agilent, Berkshire Hathaway, Hilton, Lowe's and Restaurant Brands and reestablishing Starbucks, all named in the letter.
- The rationale predated the crash and is on the record: the letter dates the disclosure of the hedges to March 3, 2020, and states the firm bought the protection "because of our concern about the negative effect of the coronavirus on the U.S. and global economies".
- The luck component: the value peaked as markets bottomed, and had Pershing held the protection into the August 2020 recovery, most of the gain would have reversed.
- The fund returned about 70 percent in 2020, its best year, which separates the hedge result from the overall result.
On March 23rd, we completed the exit of our hedges generating proceeds of $2.6 billion for the Pershing Square funds ($2.1 billion for PSH), compared with premiums paid and commissions totaling $27 million, which offset the mark-to-market losses in our equity portfolio.
Ackman's own words, signed, in Pershing Square Capital Management's letter to investors dated March 25, 2020. The same letter describes the hedges as "purchases of credit protection on various global investment grade and high yield credit indices" bought "at near-all-time tight levels of credit spreads", and dates their disclosure to March 3, 2020.
What happened, dated
Every entry carries the date and the record behind it. Sources are indexed against the register below.
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Hedges disclosed
Pershing Square discloses that it has acquired large notional hedges with asymmetric payoffs: credit protection on global investment-grade and high-yield indices, bought at near-all-time tight spreads. Source 1
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Hell is coming
The CNBC Halftime Report interview where Ackman urges a 30-day shutdown and warns of bankruptcies. Source 2
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Full exit
The hedges are fully closed at $2.6 billion, against $27 million of premiums and commissions. Source 1
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Letter to investors
Ackman puts the exit, the proceeds and the redeployment on the record in a signed letter. Source 1
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Year end
Pershing Square reports a 70 percent return for 2020, its best year on record. Source 3
What the evidence shows
The receipts are real
Every number in the claim comes from Ackman's own signed letter two days after the exit: $27 million in, $2.6 billion out, closed March 23, 2020. Contemporaneous coverage matched it the same week. This is not a retrospective rebuild of a trade that never happened.
Good decision, lucky window
The decision quality shows in the sequence: the analysis came first, the hedge was sized as asymmetric insurance at tight spreads, and the firm exited with discipline as the value peaked. The luck shows in the window: a hedge that pays when markets bottom and is sold before the recovery depends on getting both the entry and the exit roughly right. Pershing did, and no playbook guarantees that twice.
What the record does not prove
The win proves the trade, not the method. It says nothing about whether the same play would work in the next crisis, and the 2023 Treasury short that followed was a different trade with a different, smaller outcome. JMM keeps the hedge audit separate from any claim about repeatable skill.
Every receipt, with retrieval dates
JMM attaches a statement only when the contemporaneous primary record and an exact locator exist. Retrieved dates are when JMM last verified each link.
Evidence strength: Quoted from the primary record. Qualified: no official or statistical series is attached, so the verdict rests on the documentary record alone.
Signed by William A. Ackman: "On March 23rd, we completed the exit of our hedges generating proceeds of $2.6 billion … compared with premiums paid and commissions totaling $27 million"; disclosure date and redeployment list in the same letter
The March 18, 2020 Halftime Report interview
2020 fund performance and hedge attribution
Redeployment details after the hedge exit