Billionaire investor told how to hedge a portfolio

US, WASHINGTON (ORDO NEWS) — Bill Ekman, American financier and entrepreneur, founder and director of the Pershing Square hedge fund, managed to take advantage of the critical economic situation in time, while the outbreak of coronavirus led to market collapses to record lows for many years, Business Insider writes.

His company closed all of its hedging positions: this brought her $ 2.6 billion, while bonuses and commissions for these positions amounted to $ 27 million.

The secret to the success of the hedge fund is that Pershing Square turned to the protection of loans for investment and high-yield bonds, betting on the increased risk of default of companies during the upcoming economic recession.

The multi-billion-dollar profit received by the fund was a compensation for Ekman’s losses in other portfolio investments: it ensured an increase in his company’s shares by 7.9% at the beginning of this week.

All proceeds were reinvested. The hedge fund has increased positions in Berkshire Hathaway, Hilton, Lowe’s, Restaurant Brands International, Agilent, as well as Starbucks.

The bet made by the company on high-yield securities was not in vain: reliable assets grow in value as the likelihood of corporate bankruptcies grows. They, in turn, depend on the degree and speed of closure of enterprises, the forced regime of self-isolation and other quarantine measures introduced to protect citizens from coronavirus. As the fight against the epidemic reduces economic activity, bond ratings fall, and investors fear the worst.

Ekman’s hedge fund began to buy investment bonds with very narrow credit spreads about a month ago, so the risk of losses was minimal. “We did this because of our concern about the negative impact of coronavirus on the US economy and the global economy, as well as on equity and credit markets,” the company’s press release said.

But after last week all the attention of investors shifted to the actions of the Fed and the Ministry of Finance, which began to save and improve the corporation, Ekman’s fund began to liquidate its protective rates.

“The federal government and the US Treasury have unprecedentedly intervened in financial markets, Congress is at the stage of adopting legislation that will support the economy, labor and citizens of our country in a period that we consider temporary, but characterized by a massive economic shock,” the businessman said.

In social networks and in an interview with CNBC, Ekman predicted that an outbreak of coronavirus would cause economic upheaval if the US did not introduce a strict quarantine regime for 30 days. Even despite a series of negative comments addressed to him accusing him of intentionally intimidating the markets, the investor said: “I’m sure that President Donald Trump will do the right thing.”


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