Billionaire Bill Ackman's hedge fund just saw its winning streak slow down as banking turmoil weighs on its bets

• Bill Ackman's Pershing Square returned 0.3% in the year to date through March 21.
• That lags the S&P 500, which has returned about 4.7% in that span.
• Pershing's smaller return follows a 2022 of outperformance compared to the S&P 500.

Billionaire investor and Pershing Square Holdings chief Bill Ackman has seen his winning streak cool off in the first quarter, according to an annual letter to shareholders released Wednesday.

In the year to date through March 21, the letter said, Pershing Square has returned 0.3%. In the same stretch, the S&P 500 has returned about 4.7%. 

Over the last five years, the firm has returned 25.1% annually on average, per the letter, compared to the S&P 500's 9.4% yearly gain. And Pershing continued the streak of outperformance last year, when it shed 8.8% while the S&P 500 lost 18.1%. Part of that strength, according to Ackman, stems from the hedging strategy he implemented in late 2020 as he forecasted rising interest rates. 

"Since the inception of this hedging program in late 2020, these hedges have generated total proceeds of $2.8 billion from a total cost of $419 million for PSH and the other two Pershing Square funds ("the Funds"), as of March 21, 2023," the letter said.

That bet on rates worked last year as the Fed began its aggressive monetary tightening campaign, raising interest rates nine consecutive times, most recently with a 25-basis-point move in March.   

However, yields have dropped over recent weeks as turmoil in the banking system raised expectations that the Fed will pivot to rate cuts later this year. Ackman has since tweeted that regulators have not done enough to curtail the fallout of the crisis.

"Since sharing our views on Twitter during this banking crisis could be perceived as having an impact on the short-term trading prices of bank securities, we elected to pass on any investment opportunities in banks, long or short, while sharing our views on what we believed the government should do," Ackman wrote in the shareholder letter.