Money manager Bill Ackman’s hedge fund Pershing Square once boasted extraordinary returns. For instance, in 2014, the fund beat out the S&P 500 by a whopping 27%, with 40% gains.
However, Pershing Square’s returns are not what they use to be…
Last year, the fund posted a negative return of 13.5%; in 2015, it returned negative 20.5%, significantly underperforming markets two years in a row. In fact, since the end of 2012, Pershing has returned 5.7% to investors, while the S&P 500 has skyrocketed 67.4%.
Majorly contributing to Pershing’s recent sagging returns is that three of Ackman’s worst trades ever all happened over the past two years…
Bill Ackman’s Biggest Blunder No. 3: Target Corp. (NYSE: TGT)
In 2007, Ackman set up Pershing Square IV, a single-stock fund that invested $2 billion in Target Corp. (NYSE: TGT) call options and other derivatives that year. The fund ended up losing 90% of that money after TGT shares plummeted 50% in 2009. At the time, Target’s ‘expect more, pay less’ slogan became half irrelevant as consumers began to shy away from the retailer in favor of Wal-Mart, which was cheaper and offered a wider food selection.
In May 2009, Ackman said that Target’s board was too ‘cozy’ and ‘insular,’ and it lacked members with requisite retailing, credit card, and real estate backgrounds. In a letter to shareholders, Ackman said Target ‘has substantially underperformed its potential’ due to the board.
This post was published at Wall Street Examiner on March 17, 2017.
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