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Famed hedge fund manager Bill Ackman had his best trade of all-time earlier this year when he bet against the market, and he's placing a similar bet again despite the market optimism surrounding the development of a COVID-19 vaccine.
What Happened: Business Insider reports that Bill Ackman placed a new hedge against the market Monday.
The Pershing Square Capital Management CEO announced his new trade at the Financial Times’ Dealmaker Conference Tuesday.
Ackman is placing an $8-million bet on a surge in corporate defaults.
“What’s fascinating is the same bet we put on eight months ago is available on the same terms as if there had never been a fire and on the probability that the world is going to be fine,” he reportedly said.
Why It’s Important: Ackman turned a $27-million bet on the same idea into $2.6 billion earlier this spring.
Ackman predicted that cases of coronavirus would spike and the market would sell off.
The profit made from Ackman’s first pandemic trade was put back into portfolio companies like Berkshire Hathaway (NYSE: BRK-A)(NYSE: BRK-B), Hilton Worldwide (NYSE: HLT), Restaurant Brands International (NYSE: QSR), Lowe’s Corporation (NYSE: LOW) and Starbucks Corporation (NASDAQ: SBUX).
As of Oct. 31, Ackman’s hedge fund is up 44% year-to-date. Without the pandemic trade, Ackman’s portfolio would be down on the year.
The market traded higher Monday on hopes the vaccine will lead to reopening of businesses and sectors.
Ackman is “bearish” on the vaccine news, as he said it could lead to people taking the virus less seriously.
A difficult few months are ahead before the recovery takes off, in the investor's view.
What’s Next: Ackman launched a SPAC earlier this year.
Pershing Square Tontine Holdings (NYSE: PSTH) has not found a target yet and has over $4 billion available to invest.
SPY Price Action: The SPDR S&P 500 Trust ETF closed up 1% Wednesday at $356.67.
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