By Mari Hansen These days, you can sense it before anyone says it aloud when you walk into practically any allocator meeting in London or New York. The atmosphere has changed. The headlines continue to soften and the markets continue to rise, but the real money managers appear remarkably silent. As this has developed over the past few months, it appears that the smart money is now debating how to hedge rather than whether to do so.
Naturally, Bill Ackman is in the center of it. For weeks, there have been rumors of a new “doomsday” vehicle targeting credit markets and systemic risks. Although the specifics are still vague, the narrative is well-known. When the world went into lockdown in early 2020, Ackman turned a $27 million credit hedge into about $2.6 billion in a single, nearly theatrical trade that solidified his reputation. He frequently emphasizes in interviews and on social media that you don’t have to foresee the disaster. If it occurs, you only need to be paid a huge sum of money. This time, investors appear to believe him, in part because they regretted not believing him the last time.
| Topic Profile: The Pandemic Hedge Trade | Details |
|---|---|
| Most cited example | Bill Ackman’s Pershing Square credit hedge that turned roughly $27M into $2.6B in March 2020 |
| Strategy type | Asymmetric tail-risk hedging, credit default swaps, long volatility |
| Original benchmark portfolio | Sussex Partners’ diversified liquid uncorrelated portfolio (built 2017) |
| Academic reference | “The Golden Hedge” study by Burdekin & Tao, published in Economic Modelling |
| Recent margin-call event | April 2025 — steepest hedge fund margin calls since 2020 |
| Regulatory backdrop | Bank of England Financial Stability Report, December 2025 |
| Asset class spotlight | Gold (mixed track record in 2020), Treasuries, credit protection |
| Current allocator mood | Cautious, fragmented, “doomsday-curious” |
Although no one rules that out, the case for a new pandemic hedge isn’t really about another virus. It has to do with the architecture of vulnerability that was revealed in 2020 and that may not have disappeared. Supply chains continue to be centralized. Sovereign debt is more substantial. The core fixed-income markets continue to have less liquidity than central bankers would like to acknowledge. Elevated global risk and significant macroeconomic uncertainty were noted in the Bank of England’s most recent Financial Stability Report—language that usually sounds bureaucratic until something goes wrong.
Allocators frequently revisit the work of companies such as Sussex Partners, which established a diversified, liquid, uncorrelated benchmark portfolio years prior to the arrival of COVID. Even on the days when gold and Treasury bonds were being sold along with everything else, that portfolio not only survived but generated positive returns by March 2020. That particular detail is still important. It served as a reminder that traditional safe havens can fail during the week when they are most needed and that the cleanest hedges are frequently those that are constructed on purpose rather than by accident.
The story of Gold itself serves as a helpful warning. Many investors don’t want to hear what Burdekin and Tao’s study comparing 2008 and 2020 discovered: gold was a reliable hedge during the global financial crisis but much less so during the pandemic, primarily due to the rapid recovery. Hedges are only profitable if the crisis lasts long enough. It’s worth pondering that statement.
The speed has changed. Risk desks have been rebuilding tail-risk books ever since the tariff shock last spring hit hedge funds with the biggest margin calls since 2020. Long-dated volatility is being purchased by some. Credit default swaps are being stacked on weaker corporations by others. Some are keeping more cash than their mandates permit, which is a more covert activity. The next shutdown might not be caused by a virus at all. It could be a credit event, a geopolitical disruption, or an AI-driven liquidity gap that has not been adequately modeled. The trigger isn’t the main focus of the hedge. It has to do with staying awake when the room darkens.
It’s difficult to ignore the fact that those who experienced March 2020 discuss it in a manner similar to how pilots discuss a near-miss. Not precisely out of fear. It’s more like a refusal to be taken aback twice.