Bill Ackman's bad year may be about to get worse, and it is all thanks to the U.S. government.
Earlier this week, Ackman sent a 17-page letter to investors in his hedge fund, Pershing Square, which said, "2015 will be the worst performance year in Pershing Square's history, even worse than 2008 during the financial crisis," Reuters reported.
On Friday, the U.S. government passed the $1.1 trillion omnibus spending bill that will prevent another government shutdown and fund federal agencies through next fall. A provision in the bill, called Jumpstart GSE, prohibits the Treasury Department from selling its stakes in mortgage-finance companies such as Fannie Mae (FNMA) and Freddie Mac (FMCC) until it is instructed to do so through legislation signed by the president.
It is unlikely that such legislation will materialize any time soon. In October, the Treasury Department sent an email to Bloomberg that stated: "The administration does not support Fannie Mae or Freddie Mac exiting the conservatorship in the absence of comprehensive housing-finance reform."
As such, the passing of this spending bill is likely to further hurt Ackman's stake in Fannie Mae, which he announced in a 112-page slide show during the 2014 Ira Sohn conference.
He reaffirmed his position during CNBC's Delivering Alpha conference in July and said the position has "the most upside and probably has the most downside of anything we own." He added that the downside is unlikely. Even so, Ackman admitted that, given the risks, Fannie Mae represents the "sex and violence" part of his portfolio.
Although shares in Fannie Mae popped following Ackman's appearance at Delivering Alpha, they are down 23.7% since mid-July and trading at $1.75.
"Fannie and Freddie are really the only way to have a housing finance system in the U.S. with low-cost mortgages for middle-class borrowers," Ackman said at Delivering Alpha.
While that may be true, with Fannie Mae and Freddie Mac both expected to be under conservatorship for some time, it is unlikely that shares in Fannie Mae will hit the $47 Ackman projected in 2014.
