Andrew Bary

Investor Bill Ackman could have made close to $1 billion from his investments in Fannie Mae and Freddie Mac as the stocks of the two mortgage giants have soared recently on hopes that the incoming Trump administration will free them from government control.

Ackman, who heads Pershing Square Capital Management, has been among the biggest boosters in the investment community of the privatization of Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage (Freddie Mac), arguing on X that it would be a boon to the government and long-suffering shareholders. They were put in government conservatorship during the 2008-2009 financial crisis.

Ackman doesn't disclose his firm's investments in Fannie Mae and Freddie Mac, but one Ackman watcher estimates that the billionaire's main investment vehicle could own about 180 million common shares of the two companies.

Pershing Square had no immediate comment on its Fannie Mae and Freddie Mac investments.

Fannie Mae shares are up 6% Friday to $5.30, and Freddie Mac stock is 4% higher at $5.19 after both hit new 52-week highs during the session. Over the past year, Fannie Mae stock is up about 400%, and Freddie Mac stock, 500%. They're up over 50% so far in 2025.

Ackman's chief investment vehicle is Pershing Square Holdings, a European listed closed-end fund that also trades in the U.S. under the ticker symbol PSHZF. The fund has net assets of about $13 billion and a market capitalization of $9 billion. Its shares are up 0.7% Friday at $50.75. The fund trades at about a 30% discount to its net asset value.

In his semiannual letter to fundholders in August, Ackman wrote: "Fannie Mae and Freddie Mac remain valuable effectively perpetual options on the companies' exit from conservatorship."

Ackman and other institutional investors aren't required to list Fannie Mae and Freddie Mac in their quarterly 13-F reports that detail their U.S.-listed equity holdings. The Securities and Exchange Commission hasn't required this since about 2010.

In its annual report, Pershing Square Holdings lists its concentrated equity holdings that include Chipotle Mexican Grill, Alphabet, and Hilton Worldwide Holdings. It omits Fannie Mae and Freddie Mac.

The annual for 2023 does show $180 million of equity holdings in "financial services." Eric Boughton, a portfolio manager at Matisse Capital, whose Matisse Discounted Closed-End Strategy fund (MDCEX) holds Pershing Square Holdings, thinks that listing is for Fannie Mae and Freddie Mac and estimates the holdings of the two stocks at about 180 million shares.

A holding of 180 million shares would be consistent with Pershing Square's filing in 2014 -- the latest one that Barron's is aware of -- showing a holding of 65 million shares of Freddie Mac and 115 million shares of Fannie Mae.

That stake would be worth over $900 million now, up from about $200 million a year ago. Pershing Square also holds what Boughton thinks is about 10 million shares of Fannie Mae and Freddie Mac preferred stock now worth about $120 million. Fannie Mae's benchmark preferred issue now trades around $12 each -- about half its face value -- and up from about $3 a year ago.

Pershing Square Holdings accounts for nearly 90% of Pershing Square Capital Management's investments.

Boughton added that "Fannie/Freddie, even at current levels, continue to be attractive call options which could pay off handsomely if privatization occurs and takes a form similar to what Ackman assumes." Ackman has tweeted the stock could top $30 a share in a successful privatization.

Pershing Square Holdings returned about 10% last year based on its net asset value, way behind the S&P 500's nearly 25% return. The fund is off to a good start in 2025, gaining 0.4% through Jan. 7.

Write to Andrew Bary at andrew.bary@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

January 10, 2025 12:08 ET (17:08 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.