Bill Ackman: There’s One Strategy for Sustained High Investment Returns

In this interview with Reuters, Bill Ackman explains why he prefers concentrated investing, emphasizing the value of owning 10 to 11 exceptional investments instead of diversifying across many ideas. He believes great opportunities are rare, and focusing on fewer investments enhances potential returns.

However, this approach often leads to more volatile performance and scrutiny during downturns. Ackman highlights that most of the world’s wealthiest individuals built fortunes through a small number of businesses, not broad diversification. Concentration also simplifies operations, enabling small, skilled teams to manage portfolios effectively.

He argues this focused strategy is essential for achieving superior long-term results, despite the challenges of increased visibility.

Here’s an excerpt from the interview:

Ackman: I’ve always had the view that, you know, why not own the best 10 or 11 investments as opposed to ideas 12 through 25 or 12 through 100, which is more typical. And, you know, I think there are very few great investments at any one time.

So, the ability to concentrate is an enormously valuable asset of a strategy.

The problem with it is that it leads to bumpier returns, and it leads to more attention on mistakes or things that aren’t going well. I don’t know a portfolio manager that doesn’t have a stock that’s down in their portfolio, right? But you don’t read articles about it. We’re getting an awful lot of attention for a pretty high-profile situation that’s struggling.

But I think there’s, you know, it depends on what your business model is. If you want to make high rates of return over a long period of time, it’s hard to do that being very diversified. I mean, if you look through the Forbes 400 wealthiest people in the world, most of them made their fortune in one business or a portfolio of two businesses.

Very few made it in a portfolio of 100.

So, it’s that. And the other benefit is that it allows you to run a much simpler investment firm. We have an eight-person investment team. If we had 30 names, we couldn’t manage that portfolio the way we do with a small team. By having a small team, you can hire better talent.

You can watch the entire interview here: