An investment trust that tracks the hedge fund run by the US billionaire Bill Ackman is to join the FTSE 100 after bets on the market carnage caused by coronavirus earlier this year produced bumper returns.
Pershing Square Holdings will be promoted to London’s blue-chip index on 18 December, meaning the pensions investments and tracker-fund holdings of millions of people will be adjusted to include shares that mirror the hedge fund.
The Guernsey-registered trust tracks the performance of Pershing Square Capital Management, the New York-headquartered fund founded by Ackman in 2003. Pershing managed assets worth $17bn (£12.7bn) at the end of November. The fund, named after a square adjacent to Grand Central station in New York, includes holdings in big US stocks including Hilton and Chipotle.
In the secretive hedge fund world Ackman is unusually prominent and outspoken. Earlier this year he caused controversy when he appeared on TV to warn that “hell is coming”. Ackman reckoned that the coronavirus pandemic would cause a deep economic shock to the American economy.
Ackman backed his theory with a $27m bet on financial instruments whose value rocketed when investors scrambled to protect themselves against companies defaulting. He made a profit of $2.6bn in the market turmoil and then used the profits to buy shares in companies that Ackman thought were undervalued.
He ran a high profile $1bn campaign claiming that the nutritional supplements maker Herbalife was a crooked pyramid scheme. The campaign backfired badly, leaving Ackman nursing losses and handing big profits to those who opposed him.
His big winning bet this year – which ranks as one of the most lucrative trades in history – has helped Pershing to a 62.8% gain over the course of 2020 up to the end of November. The fund also made a 58% gain in 2019, after years in which the bet against Herbalife had dragged back profits.
Last month Ackman said he had repeated his previous bet that US corporate fortunes would decline in a “challenging time” before vaccines against Covid-19 are widely available in the world’s largest economies. However, he also added that he eventually expected “a robust recovery”.
Hedge funds rarely run listed companies, in part because of stricter disclosure requirements. However, a large proportion of US and UK pension funds already have significant exposure to the hedge fund sector via direct investments.
Many pension funds automatically invest in all of the companies included in the FTSE 100 index, meaning elevation to the top tier is generally accompanied by a flurry of big investors buying stakes.
Pershing Square Holdings will take the FTSE-100 place of Homeserve, the home repair business, which only joined the index in March.