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CanadianValue
CanadianValue
Articles (4601) 

The Happy Warrior — Bill Ackman

The stock-market collapse of 2008 claimed many victims in the hedge-fund industry, as portfolio values plummeted and a cascade of redemptions made the losses permanent for some investors. One manager who survived the mayhem and has prospered since is Bill Ackman, the 45-year-old chief of Pershing Square Capital Management. His funds under management have risen from $6.7 billion in August 2008, just before the crash, to $10.3 billion. Nearly all that growth has come from superior performance — his Pershing Square LP fund is up 16.64% a year compounded for the period 2008 through 2010 — rather than new money.

The fund posted a 51.46% annual return from 2008 through the end of 2010. Another mortgage-trading outfit, SPM Structured Servicing, finished No. 2 with a 49.25% annualized return, while Medallion, a quantitative fund, came in third with a 48.16% annual gain in that time. Medallion is run by Renaissance Technologies, the Long Island, N.Y., firm founded by mathematician James Simons.

The Pershing fund's performance is remarkable, not only because the typical hedge fund returned 2.45% a year over three years, but also because Ackman runs a traditional equity hedge fund that invests both long and short. Only 12 such funds qualify for Barron's Top 100 Hedge Funds ranking this year, and several of them focus solely on Asia or Europe.

Our list is dominated by various types of debt- and -commodities trading advisories, with the top spot going to Providence MBS Offshore Ltd., an arbitrage fund in Providence, R.I., specializing in mortgage-backed securities (see story, "Leaving Stocks in the Dust"). The fund posted a 51.46% annual return from 2008 through the end of 2010. Another mortgage-trading outfit, SPM Structured Servicing, finished No. 2 with a 49.25% annualized return, while Medallion, a quantitative fund, came in third with a 48.16% annual gain in that time. Medallion is run by Renaissance Technologies, the Long Island, N.Y., firm founded by mathematician James Simons.

Many well-known funds' performances still haven't fully recovered from 2008, when the Standard & Poor's 500 dropped 37% and credit markets froze. The subsequent performance of big names like Citadel, Drake and Och-Ziff wasn't enough to push them on to the Barron's 100 list, where the average three-year return is a robust 17.61%.

CVS Caremark (NYSE:CVS) and inMcDonald's(NYSE:MCD), one of two Dow stocks to rise in 2008, along with large short positions in mortgage insurers likMGIC(NYSE:MTG) and troubled municipal-bond insurers such as MBIA(NYSE:MBI) and Ambac (ABKFG). But he suffered a very public hit in a separate fund outside his primary hedge funds that torched nearly all of a $2 billion leveraged bet made on the retailer Target (NYSE:TGT). He's also suffered a sizable loss on Borders Group (BGPIQ), the bankrupt book chain.

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About the author:

CanadianValue
http://valueinvestorcanada.blogspot.com/

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