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Bill Ackman’s hopes of achieving his first positive year in four are hanging in the balance after a stock market rout that eliminated the 17 per cent gain his hedge fund held earlier this year.
Mr Ackman’s Pershing Square Holdings has become the latest casualty as activist hedge funds limp towards the finish of a disappointing year, in which they have posted losses overall and barely beaten the US equity market.
Pershing Square slumped 8.5 per cent in October as concerns over global growth and rising interest rates hit markets, and it was down another 9.5 per cent this month as of Tuesday, leaving it just above flat with returns of 0.7 per cent for the year. In mid-September it was up 16.9 per cent.
The fund is beating Hedge Fund Research’s Activist Index, however. The index was down just over 6 per cent for the year to the end of November. (Pershing Square was still showing an 11.3 per cent gain at the same point.)
The disappointing overall performance of activist hedge funds masks a wide array of returns this year. Corvex Capital, Keith Meister’s fund, is one of the best performers, with returns of about 6 per cent, said people who have see the figures. David Einhorn’s Greenlight Capital is on course to be one of the worst, down nearly 28 per cent at the end of November.
Performance elsewhere has been mixed: Dan Loeb’s Third Point was down about 5.2 per cent as of the end of November; ValueAct is down slightly; and Scott Ferguson’s Sachem Head is down roughly 4.6 per cent. Jana Partners is said to be up slightly, said investors who have seen the returns data.
While a few of Pershing Square’s investments — ADP, Chipotle and Platform Specialty Products — are up on the year overall, each of the fund’s main holdings are down this month. Pershing has been hit particularly hard by a drop in the share prices of Fannie Mae and Freddie Mac, the mortgage finance giants, each of which are down more than 50 per cent year-to-date as hopes of reform of the US housing market have been dashed.
After drops of 1.6 per cent in 2017, 9.6 per cent in 2016, and 16.2 per cent in 2015, this may still end up being the first year for Pershing Square with positive returns since 2014.
One of its most recent stakes, in Starbucks, has fared better, though it, too, is down this month.
Hedge funds are struggling through one of their worst periods since the financial crisis. Over the past three months, credit and stock markets, oil prices and the dollar have all taken hits.
October and November’s performance, when hedge funds were down 3.4 per cent, was the worst consecutive two-month period for hedge funds since August and September of 2011, when returns were negative 6.4 per cent, according to data from eVestment, the data provider.
