Pershing Square books astonishing profits on hedges – in an update to our post from 4 March 2020, Pershing Square has revealed that it has cashed in its gains on the hedges it made against market falls. The hedges were designed to provide asymmetric returns – that is to say the potential losses were relatively small but the potential upside was large. In the event, hedges purchased at an all-in cost of $27m were realised for $2.6bn. $2.1bn of this went to the listed fund.
This spectacular gain has more than offset the falls in the value of Pershing Square’s portfolio – at 17 March 2020, the NAV was up 6.5% over 2020 at $25.19 or £20.85. The relatively weak pound is helping push Pershing’s sterling NAV higher. The shares are trading at a 32.5% discount to this – this seems unjust given the manager’s success.
The news of the gains is contained in a letter to shareholders that talks about the impact of covid-19 on the US and may be worth a read. It highlights the different approach being taken by most State governments as opposed to the Federal government. This is something that troubles us too. Here is that letter.
In the meantime, Pershing Square has redeployed the proceeds of the hedges into stocks that it thinks look attractive in this environment.
PSH : Pershing Square books astonishing profits on hedges