Bill Ackman may have the top-performing hedge fund of 2014, but he still hasn’t profited from his controversial Herbalife trade.
Ackman’s hedge fund, Pershing Square Capital, posted gains of 40.2% in 2014 — prompting the 47-year-old billionaire to be crowned the No. 1 hedge fund manager of the year by the financial media.
Ackman got there, however, without a win from his high-profile and controversial bet that publicly traded energy drink company Herbalife is a pyramid scheme, he told USA TODAY.
“We don’t have a material profit yet,” Ackman said of his $1 billion Herbalife short, citing legal fees and other expenses that have kept the return on investment down.
Perhaps not unexpectedly, Ackman, known for making waves with his investments, expects to be in the black on Herbalife very soon.
Indeed, he is so confident Pershing Square will start reeling in the profits from its Herbalife trade that he plans to donate $10 million — pegged to his future Herbalife profits — to TheDream.US, a charitable organization.
Ackman called the donation “an advance” on his promise, made in 2012, that he will donate every penny of his personal profits from the short sale to charity.
The trade is “break-even” now, he said, adding that he will profit off every dollar the stock declines from here on in.
Still, it’s a bold move given how rocky the trade has been thus far. Not only has Herbalife vehemently denied Ackman’s allegations, but a cadre of hedge fund managers, including billionaire Carl Icahn, sided with the company while blasting Ackman as a “loser” and a “crybaby.”.
The stock shot up to as high as $81 a share early this year, prompting Ackman to vow he wouldn’t abandon the trade despite paper losses.
Since then, however, Ackman has been on a winning streak. Herbalife shares have plummeted amid concerns of regulatory investigations. The stock posted a loss of 52% in 2014 before falling another 15% this year.
Ackman shorted the stock at around $47 a share.
Further boosting his credibility, Ackman shot back up to hedge fund stardom with his successful bet that pharmaceutical company Allergen Inc. Would be an acquisition target.
TheDream.US provides scholarships to immigrants who have been provided temporary relief from deportation. Ackman said he chose this charity because of his belief that “the main Herbalife victims are people of Latino origin.”.
Ultimately, Ackman aims to donate as much as $200 million to charity from his Herbalife profits, he said.
“It’s been a mixed bag, for sure,” he said of the investment. “If I could have started in 2014, I would look like a genius,” he said jokingly.