Bill Ackman Trading Strategies – Life, Investments, Harvard And Philosophy

Bill Ackman is a well-known US investor. Who is he? How does Bill Ackman invest? What are Bill Ackman’s investment strategies and philosophy? These are some of the answers we try to answer in this article. At the end of the article, we have collected many quotes taken from his books and writings (quarterly letters). Ackman has a great investment track record and is full of investment wisdom. Read and learn!

Who is Bill Ackman?

Bill Ackman, alias William Albert Ackman, is an American billionaire investor, renowned hedge fund manager, and philanthropist. He is regarded as one of the best hedge fund managers of all time, and he makes his bets via his fund called Pershing Square Capital Management.

Bill Ackman’s childhood and education

Bill Ackman was born in 1966 in Chappaqua, New York, and is of Jewish descent. He studied social studies and graduated in 1992, but he later went on to finish an MBA from Harvard.

He married in 1994, and got three kids, but separated in 2016. A few years later he got a new child with his fiancee.

Bill Ackman’s investment career

Ackman rose quickly to fame after graduation:

Bill Ackman and Gotham Partners

After education, Ackman laid the foundation of the investment firm Gotham Partners in 1992 with his fellow Harvard graduate David P. Berkowitz. The investment firm began its operation with small investments in public companies through the stock market.

But Ackman’s real journey in the investment world began with his landmark bid for Rockefeller Centre in 1995 in partnership with insurance and real estate from Leucadia National. Despite losing the important bid, the buzz built around his company, Gotham Partners, drew the attention of investors from across the country. His company got massive media publicity due to this bid.

As a result, his company came into the limelight for the first time and people began taking notice of Ackman.

Because of the bid and the publicity, Gotham Partners became a company with $500 million in assets under management (AUM), as investors started showing faith in Ackman’s innovative investing techniques. Ackman continued working in Gotham, but it “blew up” in 2001 after a series of ill-placed bets, among them a company that invested in golf courses. Presumably, the portfolio had a lot of illiquid assets, and Gotham Partners decided to close shop.

After a couple of years hiatus, he started a new hedge fund in 2004:

Pershing Square Capital Management

In 2004, along with his former business partner Leucadia National, Ackman started a hedge fund management company Pershing Square Capital Management in New York, which changed his fate forever.

Most of his investors from Gotham Partners didn’t follow Ackman into the new fund, and Pershing started with a rather modest 54 million USD under management (all things are relative). But Pershing turned out to be a success, and in 2010 they had 7 billion in assets under management.

As of writing, Pershing Square has about 18 billion in assets under management.

Bill Ackman’s philanthropy and social works

Apart from being an investor, Ackman has also been involved in several social and welfare activities.

  • To support innovation in economic development, education, healthcare, human rights, arts and urban development, Ackman and his wife founded the Pershing Square Foundation in 2006.
  • He is also a signatory of The Giving Pledge, under which he has committed to donating at least 50% of his wealth to charitable causes.
  • Since its inception, Ackman’s foundation has committed more than $400 million in grants for social services.
  • Moreover, in 2021 he donated $26.5 million shares valued at $1.36 billion to South Korean e-commerce company Coupang.

Pershing Square Capital Management returns and performance

After Ackman founded Pershing Square he has had great success: annual returns since inception is 17% (taken from Pershing’s investment letter):

Compared to the S&P 500 the annual returns are spectacular, although the last ten years have shown lower returns than over the whole period, both absolute and relative to S&P 500. The reason for that is the very poor four-year returns from 2015 until 2018. Ackman made a comeback in 2019, and especially in 2020 when he made some correct bets during Covid-19.

When looking at the track record a couple of things stand out:

  • Some years have huge double-digit returns, and
  • The losing years show only modest losses

Risk and reward seem pretty good!

But how do Pershing Square and Bill Ackman make these great risk-adjusted returns? We have to look at Bill Ackman’s trading and investing strategies to understand what they do:

What are Bill Ackman’s trading and investing strategies?

First and foremost, Bill Ackman is recognized as an “activist investor” and this has led him to be scrutinized by the SEC. What is an activist investor?

When you are a shareholder activist, you try to use every right as a shareholder to change direction, strategy, increase value, etc. This implies taking a very active role both in the Board of Directors and/or in the management. This often leads to a lot of noise – both internally and externally. Because of this, Ackman has frequently been in the media, and very often facing stark criticism.

A lot of noise came about after his investments in J.C. Penney, Procter & Gamble, Herbalife, Valeant, and Target after he tried to change the companies’ strategies. This has taken its toll on Ackman, and in his investment letter for 2021 he wrote that he and Pershing have “permanently retired” some of the noisiest activist activities: short-selling.

Besides “activist investing” Pershing has always tried to invest in companies that will do well over many years. We can perhaps call this “Buffett investing”: buy quality companies when they are fairly