Ackman's Pershing Square Short BP (BP) Through Credit Default Swaps

Bill Ackman's Pershing Square hedge funds were down in the June quarter, but still remain up from the year, according to a letter to investors posted at DealBreaker.com. Ackamn also disclosed that his firm initiated a short position in BP (NYSE: BP) credit through the purchase of credit default swaps.

The firm' investment thesis is based on the belief that the Gulf of Mexico disaster:

(1) likely permanently impaired the ability of BP to operate effectively in the US,

(2) the clean-up costs, penalties, and legal liabilities of the spill will continue to impair the company’s credit for many years, and

(3) there is a substantially greater probability than is reflected in the pricing of the CDS that the current liability estimates that have been publicly promulgated materially underestimate the ultimate costs to BP.

Pershing Square LP was down 4.3%, or 3.8% net of fees, in the June quarter, but up 4.6% (3% net of fees) YTD.

Pershing Square LP II was down 5.1%, or 4.4% net of fees, in the June quarter, but up 3.6% (2.2% net of fees) YTD.

Pershing Square International was down 4.4%, or 3.8% net of fees, in the June quarter, but up 4.4% (2.9% net of fees) YTD.

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