The Daily Telegraph - Your Money
‘We will make a lot of money if interest rates go up’
Pershing Square Holdings manager Bill Ackman tells Sam Benstead how he’s positioned to profit from a ‘huge boom’ in consumer spending
Retail investors are normally excluded from the exclusive world of hedge funds. That has generally been to their benefit, as hedge funds often fail to beat a simple index fund and charge high fees. One, however, has managed to return far more than the market over nearly two decades, with a 17pc average return each year. Armchair investors can own it as easily as if they were buying a British company.
It is the FTSE 100-listed £5bn Pershing Square Holdings, run by American billionaire Bill Ackman. The fund made headlines last year when it bought and sold insurance against financial panic before other investors cottoned on to the threat of Covid19. The move banked $2.6bn (£1.8bn), which was then reinvested at the bottom of the market.
Telegraph Money caught up with Mr Ackman to discuss how he manages the fund and what his next “big short” is.
WHO IS THE FUND FOR? This is a high-return strategy with a concentrated portfolio of just 10 stocks. This means that we won’t make money every month. A unique feature about the fund is that we look for ways to buy insurance against financial disasters. We like to own instruments that can make money if the unexpected and very negative happens.
This has meant we have performed better when markets fall. For example, in the 2008 financial crisis, the fund fell 18pc at its lowest point while the S&P 500 fell 53pc at its lowest. Last year when the crisis struck it fell 11pc at its trough when the S&P 500 fell 30pc.
WHAT RISKS ARE YOU HEDGING AT THE MOMENT? We think that the American government’s $1.8 trillion stimulus package, combined with low interest rates and the psychological effects of being locked up for a year, will lead to a surge in economic demand. Supply won’t be able to meet that demand, and that will create inflation by as early as the middle of the year, leading to a rise in interest rates. We have purchased financial instruments that pay off in the event of a surprising move in rates. We will lose a finite amount of money that is not material to the fund if we are wrong, and if we are right we will make a lot of money.
WHAT STOCKS DO YOU BUY? We focus on large, durable, growing companies. Business quality is the single most important metric. We are looking for companies that we can own for decades.
We are going to have a very significant economic recovery. People have been locked down and the more fortunate people have built up huge amounts of excess savings over this period. People haven’t purchased much in clothing, travel and entertainment. There is going to be a huge boom in all those areas.
We own Hilton, which represents hospitality, entertainment, weddings, celebrations and travel. It is very levered to a return to normality. Restaurant Brands, which owns Burger King; Chipotle, the Mexican food chain; and Starbucks reflect the same themes.
People are going to want to go get a cup of coffee with their friends. The bulk of the portfolio will move higher on these themes.
WHAT DO YOU NOT INVEST IN? We avoid high-growth firms whose premium prices depend on future profits. To pay a massive price relative to current cash flows, you have to be very confident about the future. I think it is very hard to be confident about the future in many of these industries. We invest in companies where we can predict the earnings confidently, and pure technology companies don’t fit that model.
We don’t short stocks anymore. There was a lot of attention on our Herbalife short, which we closed. Our view is still that we were 100pc right on the facts, but we still lost.
WHAT HAS BEEN YOUR BEST INVESTMENT? We bought General Growth Properties in November 2008 at 34¢. We spent $60m on shares at an average cost of 60¢. They were worth $3.6bn a number of years later.
AND YOUR WORST? Valeant Pharmaceuticals. It was a rapidly growing acquisitive pharma company. It ended badly and was widely covered in the press.
WHAT WOULD YOU BE IF NOT A FUND MANAGER? I would have been some kind of entrepreneur. It would have been fun to have built a company like McLaren.
HOW ARE YOU PAID? The fund has a 1.5pc management fee and a 16pc performance fee if the value of its holdings increases on an annual basis. I own 45 million shares in the trust and together the staff own 25pc of the shares.
QOn Jan 24 two rogue transactions were made from my PayPal account. I reported them as suspicious as soon as I noticed them. One was for £7,385 to a man I had never heard of, and the other was for £3,638 to another guy I also didn’t know from Adam.
PayPal can’t tell me what the transactions were for and says I must have authorised them.
Now I am being told to go to the Financial Ombudsman to resolve my complaint. I’ve been a loyal customer with PayPal and have never made transactions worth thousands of pounds. These two payments were completely out of character. I feel any financial institution worth its salt would have picked up on this.
I don’t even know if PayPal has a fraud department, as I cannot get through to one. I am a self- employed man in the middle of a pandemic and I cannot afford to lose this money. I have been in touch with Action Fraud, which has opened a case for me, but I’m still getting emails and phone calls from PayPal stating I am liable. – PCW, N Yorks A By the time I got involved, PayPal had agreed to pay you a partial refund of the first rogue payment for £6,771. But you were still £4,252 out of pocket, and I couldn’t understand why, if it was prepared to refund you for most of the first payment, that it was refusing to refund the rest.
Both of the payments in question were made on the same day and you reported them as soon as you noticed them. As far as I’m concerned you acted as quickly as you could to stop them. But the questions still remained: how and why did they happen in the first place and, if you weren’t behind them, then who was?
You mentioned to me that at around the same time as the fraud you had noticed 500 spam emails “exploding” into your Gmail account. So you ran some anti-malware software, which found a so-called Trojan horse. This is a computer virus that can steal information from your computer in order to scam you. You wiped the Trojan horse from your machine and changed all your passwords, but it appears to have been too late. It seems the computer hackers had already stolen what details they needed to hack into your PayPal account and pay themselves £11,023 of your hard-earned cash.
No wonder you have been left feeling violated and shaken after this episode. I asked PayPal to reconsider your case and in the end it agreed that you had not authorised any of the transactions. As such, it has paid you the remaining £4,252 that you lost, plus £100 to say sorry for its handling of the situation.
A PayPal spokesman said: “We never lose sight of the fact that we are entrusted to look after people’s money.
We take this responsibility very seriously and use advanced fraud and risk management tools to keep our customers and their payments safe. We take all incidents of fraud very seriously.
“After reviewing this case, we have concluded that the payments made from Mr CW’s account were indeed unauthorised. We are making a full refund and an additional goodwill payment, and have apologised for the inconvenience caused.”
This has come as a huge relief to you, as your finances are rather stretched at the moment. Now you would like to see justice served and these criminals caught. You have obtained IP and email addresses for the men whose accounts you paid the £ 11,023 to, and passed these on to Action Fraud. However, it is worth noting that they may not be the perpetrators, and could simply be low level criminals who’ve been paid to be “money mules” to facilitate the fraud.
I sincerely hope the police will investigate and catch the low-lifes who are behind this crime. For every person like you who gets their money back, there is a sea of others who are not so lucky.
I don’t even know if PayPal has a fraud department as I cannot get through to one
Banks and online money institutions urgently need to get a better handle on the situation. Had these transactions been flagged to you as potentially suspicious in the first place, this whole mess could have been avoided.
Lazy Uber driver ruined my romantic Valentine’s meal
QOn the evening of Valentine’s Day I placed a pizza delivery order with restaurant chain Franco Manca through Uber Eats. It cost £24.79 and the money was immediately deducted from my card. It gave me an estimated time of delivery of 30 minutes, which was just enough time to open some wine and light some candles.
The order was approved and the food was ready at around 7.20pm. At 7.28pm, I received a phone call from a man who said he was my delivery driver and that he needed my address. I felt deeply uncomfortable, because my address is my personal data, but I gave him my postcode and flat number. He then abruptly terminated the call.
On the app, I could see that he had declined the delivery. I suspect that he wanted to know where I live so that he could decline it if he felt it was too far away for him.
There then was a long gap before the order got another driver. It arrived at 7.58pm, by which point it was cold and disgusting. I had to reheat it. My romantic evening was ruined.
I immediately made a complaint and sent UberEats a photograph through the app. Unfortunately, the message was not received until Feb 17. Its response was that it could not process a refund because the order had been made more than 48 hours.
I am not bothered about the refund; rather, my main concern is the fact that a driver has access to my personal mobile number.
All I want is an apology that the behaviour was wrong. If a driver could call me in this way, who knows what others could do?
– RB, London
A The wine had been poured, the candles were lit, and the romantic mood was all set for you and your date. But when that eagerly anticipated taptap on the door followed by a steaming hot pizza didn’t materialise, your bubble was burst.
Instead, you received a call from a grumpy delivery driver who asked for your details and then cancelled on you. As a result your food was cold and late, and you felt that your personal data had been violated.
Putting the cold pizza aside for a moment, I first asked Uber to address your fears around data privacy. Uber said the driver in question would never have actually known your mobile number, as it would have been anonymised through its system.
It’s also normal practice for Uber drivers to phone customers when trying to locate where they are. Uber’s system shows them your drop off point as a pin on a map, but often they will need more information to find you. So I hope you’ll be relieved to know this driver actually did nothing to inappropriately violate your personal data.
Separately, for reasons unknown, your driver cancelled on you, ruining your Franco Manca pizza. You complained, but your message was not received for more than two days, rendering it invalid.
I know your complaint was less about a refund and more about peace of mind with your data, but I have arranged a full refund for you anyway as I don’t think this 48-hour cut-off rule for complaints is fair from a consumer rights perspective.
I hope you’ll have better luck with your next takeaway.