Bill Ackman’s biography: What is his investment style?

3 min. reading
Bill Ackman / 10 July, 2021

Edgar Mondragón Tenorio Journalist

“Short-term economic and market forecasting is largely a fool’s errand: we invest according to a strategy that makes the need to rely on short-term economic or market assessments largely irrelevant.”

Bill Ackman

The first steps

The story of Bill Ackman is not the story of a man moving from middle class to bonanza, it is rather the story of the heir building his own legacy. William Albert Ackman was born on May 11, 1966, the son of a mortgage financier and a top New York executive.

From an affluent and uncomplicated childhood, he graduated from Harvard University in 1988 with a bachelor’s degree in history and then went on to graduate school in business administration at Harvard Business School.

After some time in real estate, working with his father, he decided to create his first hedge fund in 1992, together with Joel Greenblatt. Although he did not do badly with this fund, he decided to close it in 2002. Two years later, Ackman opened Pershing Square Capital Management L.P., with an initial capital of $54 million.

Pershing Square Capital Management

Ackman’s new fund was virtually an instant success; it has managed to multiply the capital received, at times such as in 2014, delivering returns of up to 40% annually. At the same time, through Pershing Square, he has carried out important philanthropic work, mainly supporting children and education.

A different style

Ackman’s investment style decisions have always been a source of controversy, becoming known for his first short move against a bond insurer, followed by a capital injection rescue in favor of a shopping mall operator.

The results have also been mixed, sometimes making moves that have earned him a billion dollars, and sometimes making bets that have lost him three billion dollars.

Ackman defines himself as an “activist investor”, looking for large companies with great potential, but with financial problems, which he solves in such a way that the stock price rises and getting the value appreciation gains from these shares.

Ackman vs Herbalife

While he likes to rescue good companies with great potential, he also seeks to profit, by betting short, against companies he considers fraudulent in some way.

In December 2012, he made public a report he made, accusing Herbalife of having and promoting a pyramid scheme, in addition to offering products that do not deliver what they promise in terms of dietary supplementation, defrauding their partners and disappointing their consumers.

The report caused the stock price to fall, however, the meddling of Ackman’s old acquaintance and rival, Carl Icahn, who bet in favor of the dietary supplement company, caused the company’s shares to revalue.

After spending approximately $50 million dollars on an entire campaign against the supplement company, Ackman began to take losses on his short bet, however, he maintained positions in it.

In 2014, as a result of the campaign against Herbalife, Ed Markey petitioned the SEC, requesting an investigation into the company’s pyramid practices. This caused the stock price to fall, little by little, by as much as 50%. This allowed Ackman to cover his short position, but without fully recovering the losses.

What is his investment style?

Ackman has had mixed results in his career, in 2019 he managed to make a 58% return on his hedge fund contrasting with the losses on his short bet against Herbalife.

In 2020, he managed to turn $27 million into $2.6 billion in a single move, betting on the widespread market decline in the face of the effects of the pandemic that was beginning to loom over the world.

Ackman today

Bill Ackman remains a very mediatic and controversial guy, and his investment style has even brought him under the scrutiny of the SEC. However, he maintains that duality of betting against the companies he does not like and doing everything possible to rescue those he does like.

With controversial decisions, Ackman is one of the most famous investors and one that, without a doubt, must be followed closely to keep abreast of his power to move the market in the sectors in which he puts his hand.

 

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