BONUS: Pershing Square Founder & CEO Bill Ackman Talks Public IPO

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2:06Policies provided by Hartford Fire Insurance Company and its property and casualty affiliates, Hartford, Connecticut. 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$5 billion for a U.S. 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 by today. Of course. Thank you. So as I mentioned, this has been years in the making, at least two years.

2:45It'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? The beginning of a journey. So it's the beginning of a journey and now armed with$5 billion. How quickly can you put that to work? Actually, we think it's a very good time to put the capital to 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 portfolio, for example, Uber, Meta, they've had a good run and you're already very long them.

3:17So 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 trading at the lowest multiples. They've traded that in some cases in history. Actually, those multiples bottomed maybe two weeks ago, so we're a little bit off the all-time bottom. But very bullish on the economy, and 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.

3:49And our strategy, we like to be a big shareholder. As you said, very liquid stocks. So the market is there. What about for like Fannie or Freddie 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 capital. We're not going to tell anyone on TV what we're going to do. I see. You don't want to front run anyone. Perhaps a 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 NAV. That's not a surprise.

4:18So what does success look like in this scenario? Is, for example, like a 10 % 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.

4:47It's a business that's earned a 19 % return on equity for the last 22 years. If you look in Bloomberg, someone should do a search real time. Find me a business that's earned 19 % on equity for the last 22 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, 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 NAV, 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.

5:20And we're going to run it like a real company. Closed-end funds are kind of a backwater. No one actually wakes up and gets excited about investing in a closed-end, a traditional closed-end IPO. They're kind of generic. You don't know who runs them. I bet Bloomberg's never even run a story. They don't have conference calls with their shareholders. They don't have particularly distinguished boards of directors. if this were a C-Corp, no one would be asking me whether it should trade at a discount or not. But we can't deploy our strategy in a C-Corp, which is why we've chosen this structure. And it's more tax efficient than a C-Corp.

5:53It's a flow through entity for tax purposes. So more tax efficient. And then we fix the things that are problematic about closed end 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 24.9 % return. That's a very high rate of return relative even to the stock market, which, you know, about 10 % per annum, not as well.

6:26So it's a liquid way to invest in Pershing Square at very low cost. And we're going to build the value of this entity over decades. Well, and I know you've said before. 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 20 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.

6:56That's a much easier thing than doing an IPO. 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 Fannie and Freddie. We're going to help our company succeed. And the beauty of that is it grows our AUM. And the beauty of this, of Persians, where the management company, some people call it the GP, is it grows with compounding. Other asset management firms generally only grow with raising money. If you look at a KKR or the other sort of alternate investment management firms, if they stop raising money, they shrink.

7:33Because 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 20%, the assets will grow about 20%. And so that's a very fast rate of growth without the need to raise any additional capital. 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 25, today, post the closing of this IPO, we'll have 25 to 26 billion of fee-paying assets. Does the way you invest need to change then?

8:07Because these are huge platforms that have many different types of assets they invest in. The beauty of our strategy, we invest in the largest companies in the world, kind of large-cap, negative-cap companies, mostly based here. We're tiny in the context of the capital markets. we manage the money in a concentrated fashion, but with$25 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 you see that as a benefit to.

8:45Does it change how you communicate? Does it change what you put on social media because it could impact share prices? It does. I guess legally is one question, but beyond that. Well, actually, believe it 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 closing fund, we're not allowed to talk about it in America. And this is where I spend the vast majority of my time. So it's something we can't talk about.

9:16The beauty of this entity is we're going to be able to make an investment. We can say today we bought a 10 % stake in company ABC. Here's why we own it. Ticker symbol PSUS. 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 were very supportive of Tesla over time and reduced the cost of Tesla stock. And that's been a competitive advantage 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.

9:49It 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 a good rule to stand by. 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.

10:23Obviously, 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, this move of closing the strait, I think, was a kind of a kung fu grip type 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 strait obviously has an impact, you know, some, whatever, four percentage points or something of oil on a daily basis can move a market and that has an impact, causes inflation.

11:04in 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 however many deals that are being announced. If administration is very supportive of transactions as opposed to an FTC, 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.

11:39I didn't say any dips. I was very I basically called a recent bottom. Let's put it that I thought stocks were getting stupidly cheap. So I sort of called it out. They didn't even sell off 10 percent. I feel like some people feel uncomfortable with that. I think oil today is trading somewhere around 116 and stocks feel unbothered. 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.

12:18We have a lot of earnings coming out in the next 24, 48 hours. And you can see, you can see massive moves in different directions. There's so much capital leveraged, short-term focused, 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 in share prices. If you have the ability to be long-term, every once in a while, the price of a really high quality company gets stupidly cheap because someone is 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.

12:54And those are the kind of dislocations we take advantage of. But the dislocations, it sounds like, are over. The stupidly cheap moment has come and passed. Is that fair? I would say we're above stupidly cheap bottom. But I still think there are a lot of very high quality. The way we sort of model each of our companies, we build a model. And our kind of go-forward next three-year IRR was something north of 30 % at the bottom. You don't see that with really high-quality companies. it's probably now in the mid-20s. It's still a very high rate of projected return for some of the best businesses in the world.

13:26And that's suggestive to me the market's cheap. Or at least cheap. 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, in this market as it stands. I think that's a generally good idea. Of any market. Fair enough. In this sort of quest to build a Berkshire Hathaway type model. So you've listed these two. Let me clarify. Sure. 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 and KKR, but it's extremely investment centric.

14:03We'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 building a corporation over time. We have a company called Howard Hughes Holdings. We bought an incremental stake in about a year ago. I became executive chair. Our CIO, Ryan, became CIO. The full Pershing Square 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 signed an agreement to buy a company called Vantage Holdings.

14:33That deal is going to close in the next, you know, call it 60 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 60 years, it's built most of its value running, becoming effectively an insurance holding company. That's what Buffett has built over time. And it was his successful management of the assets. So when you heard Buffett buying Apple, it wasn't Buffett buying Apple. It wasn't even Berkshire buying Apple.

15:06It 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 Hughes is to build a long-term diversified holding company akin to what Buffett has done over a long period of time. And sort of defining what 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 BDCs and private credit. You've really drawn a distinct line that there's no exposure there. I wonder if part of that, though, is skepticism of the asset class itself.

15:40Is 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 illiquid assets, you really should have very long-term capital or permanent capital.

16:14And here you are on your quest to obtaining more permanent capital. There's so much capital is managed where the underlying asset is long-term. A company, a stock, is a long-term asset. Right. 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 bulk of our assets were hedge funds, about half the money could leave every year. It's hard to be a long-term investor if your money can leave overnight.

16:49So one of the arguments for that, though, of being able to redeem is just you're 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? shareholders have more liquidity 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 to nab does that make it more difficult to list other vehicles like this we're going to focus on doing a 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 at a premium as opposed to a discount right again the the average closed-end fund the best performing closed-end fund over the last eight years generated a 14.5 % return.

17:33At the time, we generated a 24.9 % return. That's a huge disparity. And by the way, that fund trades at a 15 % discount. Sorry, 15 % premium. Do you think you could trade at a premium? Here's my argument. Businesses that earn the kind of return that we've generated over time traded two to three times book value. Should we trade at a discount to book value? It makes no sense. And we have a tax advantage. We have a favorable corporate structure, much more flexible, much more tax efficient, liquid lists on New York Stock Exchange. 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.

18:13And by the way, the bulk of this entity is sold to very long-term holders. Right. 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 have 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.

18:51We're not going to be able to do them onshore. Yes. We'll be 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. For years, the conversation around Bitcoin was the same. Is it real? And does it belong in a portfolio? While others debated, CoinShares got to work. In 2015, they launched the world's first Bitcoin EDP, regulated, listed, and built for institutional investors. long before the U.S.

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