[Asia Economy Reporter Jeong Hyunjin] Bill Ackman, an activist investor once called the 'Baby Buffett' and the founder and CEO of hedge fund Pershing Square Capital, has dealt a humiliation to Warren Buffett, chairman of Berkshire Hathaway. CEO Ackman had long revered Buffett as a 'mentor,' but he has now sold off all his Berkshire Hathaway shares. Buffett, whose reputation has been tarnished by a series of recent investment failures, has suffered another blow to his pride.
According to Bloomberg and other sources on the 27th (local time), CEO Ackman announced during a conference call with investors that he had sold all his shares in Berkshire Hathaway, along with stakes in private equity firm Blackstone and hotel group Hilton Worldwide Holdings. As of the end of March, Pershing Square's total assets amounted to $10 billion (approximately 12.4 trillion KRW), of which about $1 billion was invested in Berkshire Hathaway shares.
CEO Ackman emphasized that the sale of Berkshire Hathaway stock was aimed at securing funds. He mentioned that with increased market volatility due to the COVID-19 pandemic, they intend to create investment opportunities that can yield higher returns. This can be interpreted as an indication that Berkshire Hathaway's profit outlook is relatively lower compared to other investment options.
He stated, "Our advantage over Berkshire Hathaway is our relatively smaller size, which allows us to be more agile," adding, "Berkshire Hathaway faces challenges in deploying $130 billion in capital (in terms of scale)." He continued, "We need to maintain liquidity so that we can leverage our agility advantage when market prices become more attractive for investment."
The reason this sale is drawing attention is due to CEO Ackman's exceptional respect for Chairman Buffett. Born in 1966, Ackman has long regarded the 90-year-old Buffett as a mentor and has publicly stated multiple times that he respects Buffett and is learning from his investment style. Forbes magazine even dubbed him the 'Baby Buffett' on its cover five years ago. When CEO Ackman first disclosed his purchase of Berkshire Hathaway shares last August, the media reported that he was betting money on his 'idol,' Buffett. At that time, Ackman invested about $680 million to acquire 3.5 million shares of Berkshire Hathaway.
However, amid the COVID-19 pandemic, the fortunes of Buffett and Ackman have diverged. During the conference call, CEO Ackman revealed that despite market volatility caused by COVID-19 this year, Pershing Square has achieved returns of 22-27% so far. Earlier, in March, Ackman invested $27 million in derivatives that increase in value as the likelihood of corporate defaults rises, earning a 100-fold return of $2.6 billion. He actively sought investment opportunities during the crisis and achieved great success.
In contrast, Buffett, who made bold investments during the 2008 global financial crisis and the 2011 Eurozone debt crisis, has been holding onto $137 billion in cash (as of the end of March) in Berkshire Hathaway without making significant new investments. Additionally, with airline and bank stocks that Buffett sold off recently surging, and news emerging that he was defrauded of thousands of billions of won by a German company, the market is increasingly questioning whether the 'investment genius' has lost his touch.
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