Bill Ackman, founder and CEO of Pershing Square Capital Management.
Adam Jeffrey | CNBC
Billionaire hedge fund manager Bill Ackman on Friday called on the Federal Reserve to rein in the support it has provided to the US economy during the pandemic.
In separate tweets, the president of Pershing Square Holdings, which manages $13.1 billion, said the central bank should start stopping cash juice immediately.
He bolstered his position by saying that last week he met officials at the Federal Reserve Bank of New York, which houses the trading desk that carries out officials’ wishes regarding interest rates and a monthly asset purchase program.
“The bottom line: We believe the Fed should step in immediately and start raising rates as quickly as possible,” he said.
“We keep dancing while the music plays, and it’s time to lower the volume and stabilize the music,” he added.
The data comes just days before the Federal Open Market Committee begins its two-day policy meeting on Tuesday.
For Ackman, insisting on tapering is nothing drastic: Investors widely expect the Federal Open Market Committee to announce on Wednesday that it will soon begin rolling back its monthly asset purchase program in which the Federal Reserve buys at least $120 billion in bonds. . Markets are eyeing monthly withdrawals of $10 billion in Treasurys and $5 billion in mortgage-backed securities, possibly beginning in November and ending in the summer of 2022.
Calling for an interest rate hike is another matter.
Federal Reserve officials stressed that embarking on a rate cut should not be construed as a path to raising rates. The Fed has held its benchmark overnight borrowing rate near zero since the early days of the Covid-19 pandemic, and most FOMC officials have indicated that the first increase will not come sooner than late 2022.
Lately, however, traders have been seeking more aggressive moves, with futures pointing to a rate hike of at least a quarter of a percentage point in 2022, starting in June, according to CME’s FedWatch tool. There is also a shy of 50-50 chance of another surge coming in December. The latest expectation of increases comes with inflation hitting a 30-year peak.
Ackman said he’s starting to set his portfolio to higher rates.
“As we previously disclosed, we hedge our exposure to an upward movement in prices, as we believe that higher prices can only negatively impact our long equity portfolio,” he wrote on Twitter.
Pershing Square’s total is up 15.7% in 2021 and 12.2% net fees this year, trailing the S&P 500’s 22.5% return, according to company data. This comes after a fantastic 2020 during which the fund returned 70.2% on the net. The company has attracted about $1.3 billion in additional assets this year.
– CNBC’s Yun Lee contributed to this report.