Billionaire Investor Bill Ackman Shares His Blueprint For The Next Decade of Wealth

We think in some sense more than ever if you're a top artist and you want to become a global artist, you need a label to help you, you know, break out.

Thanks for having me.

So, the New York Stock Exchange puts on a good a nice little celebration, which is a lot of fun. And it's the very beginning of what it will be a very long-term story. I mean, it's 22 years in that we're taking our company public. So basically this offering is the IPO or the listing of the management company the general partner a bit like the Blackstone or Apollo business model and then a new it's really our first US listed investment company where you have $43 you can buy a share stock and be an investor with us on the best terms we've ever offered to investors. So we're kind of excited to have the potential for millions of shareholders over time.

I mean, sure. So one, we don't view this as yes, it's a responsibility having other people's money, but we are by far the largest investors in the investment entity. The management team has about $500 million invested in this new entity and our goal is to grow it at a very nice rate over a long period of time. And the people that we've tried to recruit to the IPO are ones that for the most part are in this for the very long term.

So my goal was to make this a very favorable outcome for every person right and so we did something almost backwards what they do in IPOs which is normally the big institutions get the preferable allocations and the little guy might get 10 cents on the dollar. We said I'm going to give every retail investor a full allocation to the transaction because I want to favor the up-and-comer.

So, if someone asked for 10,000 shares, they actually want a thousand. Well, I gave them 10,000. So they found themselves at 1:55 p.m. on Wednesday with about 10 times as many shares they wanted. And so that led to the last few days of the trading of the closed end fund not ideal. It's trading at about a 14% discount to the cash we have sitting in the till of the company. Well that is an opportunity for someone coming in today which is you can buy cash at a discount and over time I expect we can compound at a very nice rate and we all know that following an IPO in the couple days after it opens is not really a predictor of long-term success.

Absolutely not. And actually, this IPO is different. Most investors depending on when you came in, if you were in the cornerstone round, you're ahead of the game because we gave you an interest in the management company. So this was an IPO of this investment fund and you got a piece of the general partner for free. Kind of a gift with purchase.

Sure. So the core strategy of Pershing Square has always been buying minority stakes in pretty big companies and helping make them more successful. So that's Pershing Square USA and that's our offshore fund Pershing Square Holdings. Pershing Square Inc. is the company that receives fees from the funds we manage. And then Howard Hughes is the entity that's really modeled after when you put me on the cover of Forbes the subtitle was something like Howard Hughes will become our version of a baby Berkshire. Well we're finally taking Forbes's idea and putting it into practice. So Howard Hughes is a very interesting business that owns these small cities. We own all the residential land, most vast majority of commercial land, and many of the income producing assets in the woodlands for example or Summerland in Las Vegas and we have a condominium business which we build condominiums on the beach in Hawaii. It's a bit of an unusual public company more the kind of company you normally see owned by a family. It's a private enterprise. It's not really caught Wall Street's attention except after you wrote that cover article when people thought it would be the next Berkshire. Now we're actually going to build an entity modeled after what Buffett did over time. So we're taking the real estate company, which itself kind of liquidates over time. We're selling land to home builders. We generate several hundred million a year doing that. We generate cash from real estate income producing assets we own. And we sell condominiums. We've got about $4 billion of condominiums that are under contract that will be sold over the next several years. Instead of redeploying that cash into real estate, we're buying an insurance company. You mentioned Vantage. That transaction should close in the next month or so. And we're going to manage Vantage much the same way Buffett has managed his insurance businesses where he's taken a very cautious approach to the insurance that he writes. He's taken a very cautious approach to the float generated by that insurance basically in treasuries and then he's taken the surplus of the insurer, invested in common stocks. We're going to follow that same path and the goal is to build a compounding vehicle that's something that you can put away for the next 50 years and turns into a big and valuable company over time. That's the plan. So Howard Hughes will buy companies. Will invest in insurance but will be a controlling shareholder of those companies. So much smaller scale. And the Pershing Square funds will invest in big companies but we'll buy a small stake.

Uh, I think they'll both do very well over time. Yeah. I love all my children.

So, one, I've obviously followed Buffett over time. I've been a careful reader of the Berkshire reports. But we have been debating what to do with Howard Hughes for a while. Do we keep it as a dedicated real estate company? Do we take it private? It just doesn't work as a public company. The biggest problem of the company, I would say, is that the market's cost of capital for a real estate development and land ownership company is too high. And so you can't in order for a stock to go up, you got to earn a return in excess of your cost of capital. The cost of capital is too high. So we either have to take it private or we have to transform the business. And I read a book called the Complete Financial History of Berkshire Hathaway. It's only for geeks who like Buffett. But it really tells the story of Berkshire and it becomes very clear how insurance was disproportionately huge to the value creation. And we thought let's just follow that same path here instead of starting out with a textile operation. Berkshire was a textile business and not a particularly good one, but over time it generated a lot of cash that Buffett redeployed into higher returning businesses. We're starting out with a real estate operation that by its very nature kind of self-liquidates. Instead of reinvesting all that cash in real estate, we're going to make investments in real estate that make sense for these communities, but we still will have excess cash. We take that capital and we're going to invest in insurance, and that's what we'll build over time.

They're businesses that we've admired for a long time, but they were never cheap enough for us or we at least missed the opportunities when they had moments of cheapness. But I think the market has reacted very negatively to the very large capital expenditures that these companies have committed to when they're approaching hundreds of billions of dollars and I guess investors are concerned about whether they'll earn adequate returns on these investments. I would say we don't share that concern at all. One, the valuations of the companies have come down significantly and that meanwhile their growth rates are accelerating and that's what really creates an opportunity. We have confidence in the management teams here when they say that they're earning very attractive returns on these investments. It makes sense to us. It's not clear which frontier model is going to be the winner or whether there will be a winner. Open AI was kind of in the lead and then we had Google and then Anthropic seems to be kind of in the lead. But one thing's clear, all of these companies require massive amounts of compute. And the cloud is the most scalable, safest place to get access to that kind of compute. And that explains certainly the Amazon story and Google story.

I'm a Claude Grok guy.

Grok in part because I was a small investor in xAI and I'm a X person. So Grok is very convenient and also it's super current because a lot of the training data is from X. Claude I've also used. We have the enterprise cloud model at work. We actually have most of the models at work but I tend to default to Claude or Grok.

Yeah. I want to learn about a topic.

So, what AI is doing is enabling if you want to write a song, you can now write a song. That's going to cause an explosion of creativity, an explosion of new music. But that makes it that much more challenging to break out in a world with a massive proliferation of music. So, as long as intellectual property rights are protected, we have a lot of confidence in the Universal Management team. They're doing a very effective job. We think in some sense more than ever if you're a top artist and you want to become a global artist, you need a label to help you break out. Even some of these AI artists are signing with labels because it's really how you're going to open for Taylor Swift without the backing of a label.

So what Universal has done a very good job growing the revenues and cash flows of its business keeping a very strong market position signing the best artists in the world. What I would describe as the core engine of a music company. What they've done less of a good job at is really being a public company, maintaining a balance sheet structure that makes sense, allocating capital in a way that gives shareholders confidence, communicating with the street in a way where people actually understand the business. The company's also listed on the wrong exchange and I think they would benefit with a board led by someone who actually really understands the entertainment industry. And so what this transaction does is we migrate Universal Music from Amsterdam to New York Stock Exchange where they should be listed. We take advantage of the low stock price in as part of the transaction, but 17% of the shares are cancelled. And then the board is reconstituted with Mike Ovitz as chair. Mike knows this industry and also has a long-term relationship with Lucian. We monetize an asset the market gives the company no credit for their stake in Spotify. Then we set up a balance sheet going forward and a capital allocation policy that maximizes the company's return on capital without putting the shareholders at risk. That's the play.

So where things stand now is the board is sort of really running a process right now. Board has recently hired advisors. I think they're assessing our proposal. And we'll expect to hear back from the company at this point, but it took them a few weeks to get set up.

I think people, it's never a comfortable feeling to be in the middle of a war, right? So we have the Iran situation. We have the questions about the impact on energy prices, inflation, what the impact will be on the Federal Reserve. All these things are really related to the outcome of this war. I think our house view is this war is not a many months situation. I think it's in the weeks maybe it's a four to six weeks resolution. I think once the war is resolved I think there'll be a lot more focus on the fundamental drivers of the economy.

Yes. I think once the cloud of uncertainty lifts there are a lot of very powerful forces driving the economy and ultimately the stock market and companies are reporting very good earnings.

It would go in equities. I would say liquidity, long-term growth. I would probably pick an index fund.

I wouldn't buy bonds.

I love all my children. Love all our stocks.

Yeah, I try to have the conviction based on the facts. And a key thing is if you've done a lot of work on something and you made your bet and then facts start to emerge that are inconsistent with the original thesis, you got to rethink the bet.

Look, I think it's hard for other firms to launch a vehicle like this in our industry. We're able to do it because the nature of our capital base is permanent. If someone were to set up a new fund that had no incentive fees, everyone would leave their fund that has incentive fees. Our structure is more stable than that, which is why we can do it. So I'm not sure it's the beginning of an industry trend. But I do think that the closed-end investment vehicle is an amazing corporate structure. It's just been inadequately taken advantage of and we're going to take advantage of it and I think we can build a lot of value and we have investors who've written $500 million checks in this transaction. We have investors who are going to buy one share and we're very happy to represent all of them.

Please.

You know, so Pershing Square is my second act in the hedge fund business. I have the opportunity to redo a bunch of things. I think the one thing I would have done differently from the beginning, I don't know that I would have done anything differently. But once we had launched a permanent capital vehicle, our business plan was to at once we got to a number $10 billion, we returned the outside money. I would have returned the outside money sooner and just focused on managing a permanent capital structure. It's a huge advantage in investing to have capital that can't leave so that you can be aggressive when the markets are collapsing. And you don't need to be focused on capital flows. You can focus purely on investing. That's been the best eight years in our 22-year history, and that's since we've had a permanent capital base. We should have done it earlier.

Thank you. Appreciate it.