Pershing Square has never attempted to hedge short-term market movements but has sought inexpensive hedges against the risk of dramatic market declines.

Judge as of January 2016 against Pershing Square's history to that date. True if Pershing Square's letters, filings and reported trades show no hedges aimed at short-term market movements and do show hedges against dramatic market declines that were inexpensive in structure (e.g. credit default swaps or out-of-the-money index options/CDX purchased in 2008 and later). Mostly true if both parts hold in substance with a minor exception (e.g. one hedge arguably tactical but small). Mixed if one part holds and the other is materially contradicted (e.g. tail hedges existed but Pershing also documentedly hedged short-term movements). Mostly false if the record shows repeated short-term market hedging, or no history of seeking tail-risk hedges, with only a narrow basis for the statement. False if the record shows Pershing routinely hedged short-term market movements and never sought tail-risk hedges.

Set before the research began.

1. E1 Pershing Square Q3 2008 Investor Letter Scribd (copy of a Pershing Square investor letter) · 3 November 2008 Own record

   “We recently repurchased CDS on the investment grade credit index as certain technical factors have made this investment/hedge attractive once again.”

2. E2 1 Pershing Square Holdings, Ltd. (shareholder letter by William A. Ackman) · 26 January 2016 Own record

   “While we believed that the Chinese stock market was in bubble territory, the cost of buying puts on the stock market was prohibitive.”

3. E3 Pershing Square Holdings 2015 Annual Letter (January 26, 2016) Pershing Square Holdings, Ltd. (William A. Ackman) · 26 January 2016 Own record

   “Because CDS have been an unattractive hedge, we have looked for other instruments and hedges which might protect us against “Black Swan”-type risks that may exist in the markets.”

4. E4 Pershing Square Holdings 2015 Annual Letter (January 26, 2016) Pershing Square Holdings, Ltd. (William A. Ackman) · 26 January 2016 Own record

   “by buying slightly more out of the money puts and selling further out of the money puts so as to keep the cost and risk/reward ratio of the position attractive.”

5. E5 Pershing Square Q3 2008 Investor Letter Scribd (hosting a Pershing Square investor letter) · 3 November 2008 Own record

   “We recently repurchased CDS on the investment grade credit index as certain technical factors have made this investment/hedge attractive once again.”

6. E6 PSH 2014 Annual Report Pershing Square Holdings, Ltd. Own record

   “While we make no attempt to manage short-term volatility in our performance, we have always sought to identify investments from which we will profit in the event of dramatic downward moves in the stock or credit markets.”

7. E7 PSH 2014 Annual Report Pershing Square Holdings, Ltd. Own record

   “Because of the limited amount of our capital that we expose to these commitments, the cost of such a hedging program in the last few years has been a small drag on our performance, with the risk limited to the modest amount of capital invested in these strategies.”

8. E8 Bill Ackman & Pershing Square's Hedging Strategy Market Folly · 30 August 2011

   “As such, it sounds like Pershing will underperform in times of mild market stress (like recently) but is more-so hedged against extreme outlier events.”

9. E9 Bill Ackman Finds Shorting Yuan, Riyal More Vexing Than Valuable Bloomberg (via Yahoo Finance) · 27 January 2016

   “The hedge fund's bets against the yuan and riyal are meant as hedges, Ackman wrote.”

Pershing Square's own letters record hedges against severe market declines: index CDS bought in 2008 (E3), out-of-the-money put structures built to keep costs low (E7), and a hedging program that was only a small drag on performance (E10). The 2014 letter says the same thing about not managing short-term volatility (E9). Independent coverage supports this: Market Folly described Pershing as hedged against extreme events but not mild market stress (E11), and Bloomberg reported the currency bets as hedges (E12). No evidence shows short-term market hedging, but that part rests on the absence of contrary evidence, not on positive confirmation, so the verdict is mostly true.