Bill Ackman’s Billion-Dollar Comeback

By the summer of 2015, Bill Ackman’s investment firm, Pershing Square, managed more than $20 billion. He was one of Wall Street’s most visible investors, known for making large bets and defending them in public. Then one of his biggest bets, drugmaker Valeant, collapsed. When Pershing Square finally sold in 2017, the investment had cost the firm nearly $4 billion.

Valeant was not the only problem. Ackman’s long campaign against Herbalife kept losing money, clients pulled capital, and Pershing Square’s assets fell below $9 billion by the end of 2017. At the same time, he and Karen Ann Herskovitz separated after more than two decades of marriage. Ackman later said that dealing with divorce while running the firm affected his judgment and made the business crisis harder.

The comeback did not begin with another giant bet. In 2018, Ackman went “activist on himself.” He reduced the team, stopped spending so much time meeting investors, and returned to researching a smaller number of understandable businesses. Instead of trying to win every public argument, he focused again on the work that had made Pershing Square successful.

The change showed up quickly. Pershing Square Holdings returned 58.1% in 2019. Then, as COVID-19 began spreading in early 2020, Pershing bought credit protection for about $27 million. Weeks later, it closed the hedge for $2.6 billion and reinvested much of the money after markets had fallen. The fund finished 2020 up 70.2%.

Ackman describes the deeper lesson as compounding. During the worst period, he tried to make a little progress each day — in the portfolio, the firm, and his personal life — without staring back at what had been lost. From the outside, the recovery looks dramatic. From the inside, it was built from smaller choices: admit the mistake, simplify the system, protect the downside, and take the next step.