Pershing Square largely abandoned its strategy of shorting the credit of highly rated, highly leveraged companies as a hedge in 2009.

True: Pershing Square letters, reports or reliable press coverage show that the firm used shorts on corporate credit (e.g., credit default swaps) as a hedge before and during the financial crisis, and largely unwound or stopped using this strategy in 2009. Mostly true: it was largely abandoned, but in late 2008 or 2010 rather than in 2009, or a small residual position stayed in place. Mixed: the strategy was cut back substantially in 2009 but stayed significant for some time after. Mostly false: the hedge was used, but the evidence shows it continued at scale for well after 2009. False: Pershing Square did not use a credit-short hedging strategy, or it did not wind it down around that time.

Set before the research began.

1. E1 Pershing Square Q3 2008 Investor Letter Scribd (copy of 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 Pershing Square Holdings, Ltd. Public Class USD Accum.Shs (PSHZF) Q3 FY2022 Earnings Call Transcript - November 17, 2022 roic.ai · 17 November 2022 Own record

   “So we had a period of practically a decade where there was -- we had no meaningful hedges in place other than forward contracts where we were concerned about some risk of moves in currencies”

3. E3 1 Pershing Square Holdings, Ltd. · 26 January 2016 Own record

   “Because CDS have been an unattractive hedge, we have looked for other instruments and hedges”

4. E4 Pershing Square Q3 2008 Investor Letter Scribd (copy of Pershing Square investor letter) · 3 November 2008 Own record

   “default swaps in cases where spreads have increased significantly, and have covered certain short”

5. E5 Pershing Square Holdings, Ltd. Public Class USD Accum.Shs (PSHZF) Q3 FY2022 Earnings Call Transcript - November 17, 2022 roic.ai · 17 November 2022 Own record

   “So we had a period of practically a decade where there was -- we had no meaningful hedges in place other than forward contracts where we were concerned about some risk of moves in currencies, whereas”

6. E6 Pershing Square Q2 Letter Scribd (repost of Pershing Square Capital Management letter) · 18 September 2009 Own record

   “Many of the poorly capitalized businesses with bad business models, and aggressive or fraudulent financials on which we owned CDS imploded during the credit crisis. We exited these positions at large profits.”

7. E7 Pershing Square Q2 Letter Scribd (repost of Pershing Square Capital Management letter) · 18 September 2009 Own record

   “We currently own a small portfolio of principally single-name CDS which represents disaster protection more so than investments on which we expect to profit.”

Pershing Square's Q3 2008 investor letter shows the firm held CDS on the investment-grade credit index as an "investment/hedge" during the crisis (E2, E5). Its Q2 2009 letter says it exited CDS positions at large profits and by then held only "a small portfolio of principally single-name CDS" as disaster protection (E8, E9). A 2022 earnings call describes about a decade with no meaningful hedges apart from currency forwards (E3), and the 2016 letter says CDS had been an unattractive hedge (E4). This supports the claim that the strategy was largely dropped in 2009, but a small residual position remained, which the criteria rate as mostly true. All of these are the firm's own letters and transcripts.