Bill Ekman is an ambiguous investor who made money on the pandemic
Bill Ekman is a vivid example of the fact that you can get rich without being an investment guru, but being a cunning strategist and a clever manipulator. Unlike other billionaires, he earned his fortune not by moving step by step up the career ladder, but thanks to the support of his family and cold calculation. Bill Ekman’s risky strategies are perplexing to some experts. But it was this style of financial management that made it possible to become one of those investors who made a fortune on the coronavirus pandemic.
Who is Bill Ekman
According to Wikipedia, Bill Ekman is the son of wealthy Jewish parents, born in 1966. In the world community, he is known as an investor who founded the Pershing Square Capital hedge fund. His company knew both rapid ups and annoying downs, which did not prevent Ekman from becoming a successful financier and the owner of a billion-dollar fortune.
The investor’s riskiest ventures deserve special attention: the story of Herbalife and 100X on coronavirus.
Education and early career
The boy did not experience any special difficulties in life, especially since he had certain abilities, and not in the financial sphere. Bill was more attracted to art. After graduating from high school, he studied at Harvard and received a bachelor’s degree. Even as a student, Ekman showed a tendency to risk, outrage and manipulation. And it often helped him.
Bill switched from art to finance and after graduating from Harvard entered the business school of the same university. During this period of life, the future billionaire begins to show interest in investments, which he will be engaged in all subsequent years.
As a business school student, Ekman, along with his friends, opens the Gotham Partners foundation. And in this, as always, Bill was helped by his father. An influential businessman contributed to the fact that major market players invested in his son’s fund. By 1988, the Ekman Foundation already had a good reputation and $500 million in management. However, due to a quarrel with partners in 2002, Bill chose to leave Gotham Partners to invest on his own.
A couple of years after leaving the established fund, Ekman and his wife founded the Pershing Square Capital Management hedge fund.
The funds earned earlier were enough to start, and these funds in the amount of 54 million. $ after just a couple of years has grown to several billion.
Perhaps the most profitable investments of the Ekman Fund can be considered:
- Purchase of Canadian Pacific Railway shares when 1.4 billion $ increased by 2 times in less than a year.
- Earnings on the growth of shares of General Growth Properties, when invested 60 million. $ rose to 3.5 billion.
The fund’s activities have not always been profitable. So, the period from 2015 to 2018 was a real test for Pershing Square. Year after year, the fund showed a loss and many believed that Bill’s career as a successful investor had come to an end. But starting in 2019, the profitability indicators went up and reached 58.1%. In the next 2020, the fund added another 25%. Its shares, unlike most similar funds, are freely traded, so anyone can become a member of Pershing Square.
It is a stretch to call Ekman a professional in the field of investment. He has his own strategy, but rather it does not contribute to profit growth, but his skillful manipulations. Bill is not one of those investors who will take risks by investing in startups, even if they belong to an innovative, considered promising sector. Ekman mostly invests in US blue chips, acquiring them during the drawdown period. It is invested exclusively in large, time-tested corporations, and not of those whose capital is concentrated in the hands of a small number of owners.
When required, the billionaire is ready to intervene to influence the activities of the company in which he has invested. For example, after Ekman acquired 10% of the shares of Allergan botox manufacturer and, becoming a shareholder, improved the management system, the profit from investing in the company brought the fund $ 2.4 billion.
And here it should be noted that such a scheme did not always work, which once again confirms the low level of competence of the investor in financial matters. The proof of this is the approach to recruitment, among which you can find people far from the financial sphere. Colleagues on Wall Street generally speak of Ekman as a self-confident and arrogant man with a superman complex.
History with Herbalife
According to Ekman himself, investing is a business where you can look very stupid for a long time before you prove your case.
This statement is clearly confirmed by the story of Herbalife, a company engaged in the trade of specialized nutrition by direct sales.
In 2012, Bill Ekman initiated a large-scale harassment of the company, declaring it a pyramid scheme and calling Herbalife’s main goal to attract new people to the network. His idea was supported by many famous personalities at that time and Ekman, inspired by the situation developing around the company, acquired shares worth 1 billion. $, which was 9% of his fund.
Apparently, the investor’s calculation was reduced to making a profit on the fall in the securities rate, but this time his calculation was not justified. Seasoned investors from Wall Street joined the fight. Despite the ongoing agitation, Herbalife securities continued to be bought, and their price began to rise after falling by 21%.
But after checking the company by the Securities Commission, no significant violations were found, however, Herbalife was accused of misreporting information and fined $ 200 million.
As a result, in 2018, the investor closed a position with the company’s shares and lost several hundred million on this story. So ended one of the biggest failures of Pershing Square.
100X on coronavirus
Coronavirus is a new phenomenon for the world, so when the first outbreak of the disease was recorded in China at the end of 2019, few people took the threat seriously. Other countries of the world have been rocking for a long time, while the coronavirus has spread further and further from the Asian region.
Against the background of general misunderstanding, it was Bill Ekman who in February 2020 made the only right decision for his fund – to use insurance. Ekman purchased swaps on the corporate bond index in the amount of $71 billion. The premium was only 0.5% of the nominal value. The interest rate in a growing market was low, so no one could predict a default. Focusing on the situation, Ekman made a bet on the decline of the corporate bond market and did not lose.
The crisis began to develop very rapidly, and at the same time the cost of swaps began to grow. As a result, the price reached 2.75 billion. $ and then the investor decided that the swap could be sold. Otherwise, if the negative scenario had not been confirmed, Pershing Square would have been in the red by $ 81 million. And so the Ekman Foundation turned 27 million in just a month. $2.6 billion $. And here Ekman played a role when, in March 2020, he announced the need to enter a lockdown, simultaneously getting rid of swaps that have not yet been sold out.
According to experts, Ekman’s successful bid helped not only save the fund from ruin, but also allowed Pershing Square to reach a new level.
Published: 29 April, 2022