Losses in the main funds on retailers such as Target Corporation and Borders Group Incorporated were offset by gains on short positions in MBIA and FSA, Ackman explained. MBIA had been “the gift that keeps on giving,” but not any longer. Ackman told the group that he had closed out the MBIA position at the end of 2008 after nearly seven years. “It’s the end of an era,” Ackman said and moved on to the next slide.
Ackman’s short position on MBIA had been his highest-returning investment to date. Pershing Square investors made about $1.1 billion as faith in the bond insurer collapsed. As the managing partner with the largest stake in the fund, Ackman received the largest share of those gains, around $140 million. He didn’t actually pocket any of it, though. The gains offset losses elsewhere in the fund during 2008. Yet Ackman figures he owes the Pershing Square Foundation the full $140 million. He has given the foundation $50 million and expects over time to pay the $90 million balance as future profits cover 2008’s losses.
Those who continued to bet with Ackman and kept putting more money into the fund made multiples of their investment.
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