Bloomberg Audio Studios, podcasts, radio news.
Now the big deal of today, and it's a day that's been years in the making for Bill Ackman and his hedge fund, Pershing Square. Pershing has raised a five billion dollars for a US dual IPO in pursuit of a Warren Buffett investing powerhouse, and for our radio and TV listeners. I want to welcome Pershing Square CEO and founder Bill Ackman.
Bill, thank you so much for stopping buy today.
Of course, thank you so.
As I mentioned this, this has been years in the making, out at least two years. It's had fits and starts, much like this American IPO market itself.
What was it like to get this over the line.
It's great, it's a great day, but it's really you know, it's the beginning, right, beginning of a journey.
So it's the beginning of a journey. And now armed with five billion, how quickly can you put that to work?
Actually, we think it's a very good time to put the capital of work, and we invest in the most liquid companies in the world. So it's really it's weeks, not months.
So it's weeks.
But there's this question, so some of the companies that you own in your other PORTFO for example example Uber Meta. They've had a good run and you're already very long then, so the question might arise, is now the right time to be doubling down?
Actually, I think the companies you mentioned are very cheap stocks today. Interestingly, some of the best businesses in the world are training at the lowest multiples they've traded that in some cases in history. Actually those multiples bottom maybe two weeks ago, so we're a little bit off the the all time bottom. But you know, very bullish on the economy, and you know there are some amazing businesses available at really cheap prices. This will be kind of
a continuation of what we're doing now. So we're going to just add to existing positions which will give us more ownership and our strategy we like to be a big, big shareholder.
As you said, very liquid stocks.
So the market is there, What about for like a Fany or Freddy where they trade OTC. How does that work? How do you dive back in without moving the market.
We're going to be very thoughtful about the way we deploy the capitol, and we're not going to tell anyone on TV what we're going to do.
I'd see you don't want to front run anyone. Perhaps perhaps wise decision. And look, you've discussed you were talking about it earlier this morning on CNBC that closed end funds they trade at a discount to Now that's not a surprise. So what does success look like in this scenario is, for example, like a ten percent discount.
Okay, So I want to give you a new construct to think about.
Please.
Okay.
So there's hundreds of closed end funds, but they're a very different animal from what we're doing here. We're adopting the closed end structure, the legal structure, the corporate structure, because it's the most flexible and most tax efficient corporate structure in America. It's never been used for the purpose that we're going to use it for.
But if you think about.
Our business as a business, think of us as an investment holding company. It's a business that's earned a nineteen percent return on equity for the last twenty two years. If you look in Bloomberg, someone should do a search real time. Find me a business that's earned nineteen percent
of equity for the last twenty two years. It trades for less than two times book value, and we're taking the company public at book value, so we think that's going to be a cheap price now at the nature of IPOs are such that in the first couple of days,
I can't tell you exactly what's going to happen. But over time, we're going to compound this book value or navy as some people call it, if we do anything like what we've done in the past a high rate over time, and it's going to compound, and it's going to grow, and we're going to run it like a real company.
Closed M funds are kind of a backwater.
No one actually wakes up and gets excited about investing in a close den a traditional clothes and IPO.
They're kind of generic. You don't know who runs them.
I bet Bloombergs never even run a story, and they don't have convers sculpt where their shaholders, they don't have particularly distinguished boards of directors. If this were a sea corp, no one will be asking me whether it should trade it a discount or not. But we can't deploy our strategy in a sea corp, which is why we've chosen this structure. And it's more tax efficient than a sea corp. It's a flow through entity for tax purposes, so more tax efficient, and then we fix the things that are
problematic about clothes and funds. So it's the lowest cost compensation for a management firm like us to manage this pool of assets. In fact, we charge our other funds incentive fees. We don't do so here, we're not permitted to do so here. So it's the lowest cost version of Pershing Square. You take our record over the last eight years since we've had permanent capital, it's been a
twenty four point nine percent return. That's a very high rate of return relative even to the stock market, which did you know about a ten percent per annum not as well. So it's a liquid way to invest in Pershing Square at very low cost, and we're going to build a value this.
Entity over decades. Well, and I know you've said, by the way, that's just one of the companies we took public.
Today, that's true.
And you have Pershing Square the holding company, the hold co, and you also have ambitions to maybe list more funds.
How quickly can you ramp up aum?
I know you said just by the nature of what you're doing, by compounding that you could get to a trillion in twenty years.
Do you have your own internal targets you're thinking of.
So the first priority is to compound at a high rate for a long period of time. That's a much easier thing than doing an IPO right. IPOs can take management time and attention. So we're going to focus on investing. We're going to focus on getting our universal music deal done. We're going to focus on helping the administration figure out Fanning and Freddy. We're going to help our companies succeed.
And the beauty of that is it grows our aem and the beauty of this of persons where the management company some people call the GP, is it grows with compounding. Other asset management firms generally only grow with raising money. If you look at a KHR or the other sort of alternate investment management firms, if they stop raising money, they shrink because they're constantly sending money back to their investors.
As they sell assets, they send money back. In our model, we build off a base and if we're up twenty percent, the assets will grow about twenty percent, and so that's a very fast rate of growth without the need to raise an exctional company.
Can you rival the size of those?
I mean, I know it's a very different model, but do you see yourself growing to a size of a Blackstone of an Apollo over time?
For sure?
And that was the point I was making. We'll have twenty five today, post the closing of this IPO, we'll have twenty five to twenty six billion of fee paying assets.
Is the way you invest need to change then, because these are huge platforms that have many different types of assets.
They invest in utifur strategy.
We invest in the largest companies in the world, kind of large cap nega cap companies mostly based here. We're tiny in the context of the capital markets. We manage money on a concentrated fashion. But with twenty five billion of capital a couple billion dollars per investment, that's small in the context of the market we invest in.
By the way, and this is quite unique, as you point out, there's not really another structure that's listed like this. How are you thinking about it though, in terms of having a listed structure, both Pershing Square and PSUs that it is centered around.
You and your very small team, which I know.
Is you see that as a benefit to does it change how you communicate? Does it change what you put on social media? Because it could impact share prices? It does well, I guess legally, is one question.
But beyond that, well, actually.
I believe or not, I've been very constrained on social media. Maybe you find that a surprise. But with respect to talking about Pershing Square, there are a lot of limitations.
Up until this moment in time.
Now we have an SEC registered entity, our existing offshore clothes and fun, we're not allowed to talk about it in America, and that's where I spend the vast majority of my time. So it's something we can't talk about. The beauty of this entity is we're going to be able to make an investment. We can say today we bought a ten percent stake in company ABC. Here's why we own it, ticker simple ps US and investment. We
can keep very close touch with our shareholders. And one thing that Elon Musk has done very well over a long period of time is he built a base of followers that you know, we're very supportive of Tesla over time reduced the cost of Tesla stock and that's been a competitive vantage that Tesla's had over time. We have already a very large base of followers in the capital markets. They haven't had a way to invest with us until now.
It does sometimes make for more volatility, though, when a post can potentially move around share prices.
How do you think about that, I.
Mean, we're only going to post stuff that's true.
I think that's I think that's a good rule to statify.
Yes.
At the same time, you know you've been pretty early in some major dislocations in this market, be it COVID, be the inflation that followed, and some really successful hedging strategies behind that. Do you see any dislocations like that at the moment and hedging strategies you'd want to deploy.
No, Actually, I think we're in a pretty We're heading into a very good place. Obviously, we have a war still underway, but I think we have by far the upper hand. I think the Iran has been denuded of military capability and I think it's only a matter of time. Administration, I think is move of closing the straight I think was a kind of a kung Fu grip ty'd move on the part of the president, and I think it's
putting a huge pressure on Iran. So I think we're going to get this resolved in the relative short term. I think that's really the biggest overhang on the market, right, you know, the you know we close the straight obviously has an impact. You know, some whever four percentage points or something of oil on a daily basis can can move a market, and that has an impact causes inflation
in the short term. But I think it's a short term phenomenon, and I think once we're through it, I do see, you know, a federal reserve that should be able to reduce interest rates. We have massive you know, AI spending, we have massive energy spending. We have a tax bill that's driving investment every day. There's how many deals that are being announced if administration is very supportive of transactions as opposed to an FTC.
Would which would stop everything.
So there's I think you're going to see lots of reasons to be bullish on markets generally.
You're pretty early in this call posting on X that any dips would be short lived, and they were.
I didn't say any. I basically called a recent bottom.
Let's put it the up.
I thought stocks are getting stupidly cheap. So if you sort of called it out.
I didn't even sell off ten percent. I feel like some people feel uncomfortable with that. I think oil today is trading somewhere around one sixteen, and stocks feel unbothered.
See, you can't think about stocks. You're thinking about stocks from an index perspective. Okay, the index is like looking at the surface of the ocean. I mean sorry, the index is like looking at inside the ocean. But the surface is moving around a lot. And what I mean by that is there are you know, a lot of stocks. There's enormous disparity in terms, there's enormous volatility. We have a lot of earning coming out in the next twenty four to forty eight hours, and you can see you
could see massive moves in different directions. There's so much capital leveraged, short term focus, tightly risk managed, which means stop losses and things like this. And the result of that is that our capital markets you can see massive moves and share prices if you have the ability to
be long term. Every once in a while, you know the price of a really high quality company gets stupidly cheap because someone gets it's forced to sell because of a bad print for the quarter or a guidance change. Really something that doesn't necessarily have any material impact on the long term business. And those are the kind of dislocations we take advantage of.
But the dislocations, it sounds like, are over. The stupidly cheap moment has come in past.
Is that fair?
I would say we're above stupidly cheap bottom, But I still think there are a lot of very high quality Like the way we sort of model each of our companies, we build a model and we were are kind of go forward. Next three year IRR was something north of thirty percent at the bottom. You don't see that with really high quality companies. It's probably now in the mid twenties. It's still a very high rate of projective return for some of the best businesses in the world. And that's
suggestive to me. The market's cheap, or at least cheap some of the This is a case where the highest quality companies are cheap. I'm not saying that energy companies are cheap today.
Sure, so you have to avoid value traps essentially, and this market as it stands, that's I think.
True of any market.
Fair enough, you know, in this sort of quest to build a Berkshire Hathaway type model so you've listed these two.
Let me clarify because I think it's a little confusion. So we're building an asset management firm that has some of the similar attributes to a Blackstone car, but it's extremely investment centric. We're going to grow this business principally by compounding as opposed to raising lots of funds. So that's one Buffett was not in the asset management business. Buffett was built a corporation over time. We have a company called Howard Use Holdings. We bought an incremental stake
in about a year ago. I became executive chair, our CIO, Ryan became CIO. The full persioning Scare team became available to the company, and that's the company we talked about about building a modern day Berkshire Pathway. And the first step we took was we sign an agreement to buy
a company called Vantage Holdings. That deal is going to close in the next you call it sixty days, something like this, and we're going to manage the assets of that insurer and we're going to work with management to make sure they underwrite very high quality, profitable insurance business. If you look at Berkshire over the last sixty years, it's built most of its value running becoming effectively an insurance holding company. That's what Buffett is built over time,
and it was his successful management of the assets. So when you hear Buffett buying Apple, it wasn't Buffet buying Apple. It wasn't even Berkshire buying Apple. It was the Berkshire insurance subsidiaries buying Apple. And we're going to do the same thing. We're going to manage this. So the goal of Howard is to build a long term divers fight holding company akin to what Buffett is done over a long period of.
Time, and in sort of defining what you know, your various holdings and your investments look like and what they're not. I know, one distinction you've made very clear, because there have been these nerves around retail funds, but it's been really centered around BDC's in private credit. You've really drawn a distinct line that these are not there's no exposure there.
I wonder if part of that, though.
Is skepticism of the asset class itself.
Is there any skepticism of that asset class.
Of private credit?
Generally yes, Look, anytime you have an asset class grow very very quickly, with a lot of participants competing, you know, return you either have to accept lower returns or more risk. That's the only way you can kind of grow in that environment. And there's, like everything else, there's a continuum of quality in terms of sponsorship. I don't think there's
inherently something wrong with private credit. I think the one thing I would say is investing in ill liquid assets, you really should have very long term capital or permanent capital.
And here you are on your quest to obtaining more more permanent capital.
Is so much capital is managed where the underlying asset is long term. A company, a stock is a long term asset. The vast majority what's caused the stock market to behave the way it does is the vast majority of asset management firms have very short term money. They have money that can leave in a minute an etf they have money that can leave overnight in a mutual fund or even a hedge fund.
You know, when we local assets.
Or hedge funds, about half the money can leave every year. It's hard to be a long term investor if your money can leave overnight.
So one of the arguments for that though, of being able to redeem, is.
Just your accountable to shareholders. How do you keep that?
How do you keep accountability to shareholders when they're not able to redeem assets out of the fund.
The shareholders have more liquid than they do in any fund because they have a stock that trades and they can buy and sell over time.
What needs to go right on the flywheel because if you do have any sort of discount, nap, does that make it more difficult?
Well to list other vehicles like this.
We're going to focus on doing great job for the PSUs shareholders, and if we do a great job, we communicate to them, well we deliver the kind of performance we have over time, we deserve to trade it a premium as opposed to discount.
Right again, the average.
Clothes and fund, the second the best performing closed then fun over the last eight years, generated a fourteen and a half percent return. As time we generated a twenty four point nine percent return.
That's a huge disparity.
And by the way, that fund trades at a fifteen percent discount, sorry, fifteen percent premium.
Do you think you could trade it at premium?
Here's my argument, right, business, that's that earn the kind of return that we've generated over time, traded two to three times book value. Should we trade it a discount book value? It makes no sense. And we have a tax advantage, right, we have a favorable corporate structure, much more flexible, much more tax efficient liquid listen New York stocks change.
I mean put.
Aside, I don't know what happens in the first couple of days after an offering, you know, but with good shareholder communication, keep people informed, good performance, this can become a core holding. And by the way, the bulk of this entity is sold to very long term holders, and so now with so much of the stock held by long term holders, it's the marginal buyer and seller that will move the price around.
By the way, are you as excited as everyone else is about getting to hear from you quarterly now when you give quarterly updates?
Or do you wish it was semi annually?
No?
No, I'm very happy to enjoy communicating, and I certainly enjoy communicating with people who've entrusted their future to us.
We actually operate.
You're not as aware of this, but today we do quarterly conference calls for our existing vehicle. We're not going to be able to do them on shore. We're able to answer questions from shareholders the way that you would want those questions to be answered.
Very much so looking forward to that. Bill, Thank you so much for your time this morning. We appreciate it.
Bill Ackman, CEO and founder of Pershing Square