Vultures Smell Blood? Star Hedge Fund Manager Ackman Reboots "Doomsday Strategy," Recreating "Pandemic-Era Contrarian Bets"

Bill Ackman is planning a new high-stakes gamble. The billionaire investor is seeking to replicate the success of his pandemic-era "doomsday trade" by establishing a new fund specifically designed to bet against market complacency, deploying asymmetric trading strategies once again as market turbulence intensifies.

According to people familiar with the matter, Ackman's Pershing Square is in discussions to establish a new fund that will bet against the prevailing market narrative through "asymmetric" trades.

This strategy is a repeat of his actions during the COVID-19 pandemic when Ackman spent $27 million on derivatives. As corporate bonds were sold off, these instruments appreciated significantly, ultimately bringing a substantial return of $2.6 billion to Pershing Square.

The plan for this new fund comes at a time when Pershing Square's flagship fund is deep in losses this year. According to regulatory filings, the flagship fund had accumulated losses of over 16% by the end of March. Simultaneously, Ackman is actively pursuing an IPO for his hedge fund management company and urgently needs to demonstrate new growth avenues to potential investors.

Doomsday Strategy Returns

The new fund planned by Pershing Square will allocate a substantial portion of its assets to short-term US Treasury bonds. Once the timing is right, capital will be concentrated in large-scale credit and macro bets, mirroring the trading style of the main fund throughout its history.

The core logic of this strategy lies in constructing highly leveraged positions using derivative instruments. In recent decades, hedge fund managers like Ackman, John Paulson, and Michael Burry have used derivatives such as credit default swaps to launch large-scale short positions against corporate bonds or mortgage-backed securities. Derivatives can also be used to bet on sharp fluctuations in currency, interest rate, and commodity prices.

One of Ackman's most well-known classic cases is his $60 million bet in 2009 during the financial crisis on General Growth Properties, a bankrupt shopping mall operator. This investment eventually appreciated to approximately $3.6 billion. The relaunch of a similar strategy reflects his judgment that the current market contains systemic mispricing.

Growth Strategy Ahead of IPO

The launch of the new fund plan aligns closely with Ackman's preparations for the IPO of his hedge fund company. Sources indicate that in private communications with potential investors, Ackman has positioned this "asymmetric" fund as a key engine for increasing management fee income for the company.

In regulatory filings submitted last month for the IPO, Pershing Square explicitly stated that the company "may elect to supplement organic growth by selectively launching new permanent capital vehicles and other instruments to scale its capital base." Ackman currently plans to merge his management company, Pershing Square, with a new closed-end fund named Pershing Square USA for the IPO, aiming to raise between $5 billion and $10 billion.

Ackman's flagship fund currently holds about a dozen stocks, with long-term significant positions in tech giants like Uber, Google, and Amazon. This highly concentrated portfolio structure makes it highly sensitive to stock market volatility. The establishment of the new fund is, to some extent, a hedge against and a supplement to the limitations of his existing strategy.

A Grander Commercial Blueprint

The new fund is just one part of Ackman's blueprint for building a larger commercial empire. He has already established a significant stake in real estate developer Howard Hughes Holdings, using it as a vehicle to create a diversified conglomerate, aiming to replicate a modern "Berkshire Hathaway" — a company that recently completed the acquisition of a property and casualty insurer.

Earlier this week, Ackman also proposed acquiring Universal Music Group through a primarily stock-for-stock transaction, valuing the record company at approximately 55 billion euros. The deal is planned to be completed by merging it into one of Ackman's special-purpose acquisition companies.

The simultaneous advancement on multiple fronts indicates that Ackman is accelerating the transformation of Pershing Square from a single hedge fund into a comprehensive financial group amidst market turmoil. For investors, whether the new doomsday bet fund is a discerning contrarian move or a strategic shift while the flagship fund is under pressure, remains to be tested by the market.