Cutting Losses

Pershing Square, a large well-known hedge fund managed by the famous Bill Ackman somehow managed an incredible feat: Losing money in each of the last three years as the S&P 500 jumped 30% in the same period of time. Hard to do. Requires really big, concentrated bets that all go wrong at the same time and don’t recover.

News hit last night that the firm will now do some layoffs and he’ll personally retreat from the public eye in order to focus on analysis and research. Good idea.

If I were him, I would keep all the operations and administrative workers and fire everyone else. There shouldn’t be a single analyst or PM left standing. In the investment markets, you have to cut your losses sometimes. Same goes for running a company. The inability to make money in what is now one of the greatest bull markets of all time is shocking. Especially considering how much the end clients are paying. Bill should want to be surrounded by better professional investors who have a clue about what’s going on.

If I were him, I’d hire some technicians, too. Come up with great ideas, and then get some help with the buy and sell decisions.

I don’t know anything about running a hedge fund. But I know a lot about taking Ls. Sometimes the people around you need to change so that you can change. Nobody wins when the family feuds.

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