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Pershing Square's Target (TGT) Fund Down Over 89.5%

February 6, 2009 12:46 PM EST
Pershing Square's William Ackman set up a hedge soley to invest in Target Corp (NYSE: TGT). As you can imagine, this hedge fund has taken a real beating. In fact, just in January, his Target hedge fund fell an extraordinary 40.1%, bringing the total loss since inception to 89.5%, according to Bloomberg.

Ackman made his bet in Target using options rather than owning the underlying stock. This is another way to add leverage, which is great when the stock is rising, but when the underlying stock falls, leverage can reallly hurt you. The decline in Pershing Square IV fund that invests in Target was about four times that of Target shares in January because Ackman employed options rather than owning the stock.

"While PSIV and Target stock have declined materially, we still believe our fundamental investment case for Target stock will ultimately be realized, although not within the original timeframe we had initially estimated," he wrote in the letter.

In the letter Bill Ackman did say he will personally invest another $25 million in the fund.

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Target Corporation (Target) operates general merchandise and food discount stores in the United States, which include Target and SuperTarget stores.

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