Bill Ackman: This Is a “Great” Time to Invest - Even at Market Highs

Thank you so much.

Actually, if I can correct you.

So PSUSA is a closed-end investment company or fund. Pershing Square Inc. is a company, an operating company. It's like a Blackstone or a KKR or Apollo. It's an alternative asset management company that collects fees from the businesses that we, the funds that we manage.

Sure.

So the entity that we're building a modern-day Berkshire Hathaway is a company called Howard Hughes. That's one of three permanent capital vehicles that comprise the underlying assets of Pershing Square, Inc. Why today? Because we've never had a US-listed... I'm an American. Our offices are here. We invest in US companies. But today, or yesterday, there was no way for you to invest with us because the rules around closed-end funds limited our ability to launch one. Some of those rules changed beginning a few years ago and that began a process for us to someday have an entity where someone with $50 can buy a share of our stock. And that was why, and as soon as we could get through the process, get the IPO done. And in terms of why now, it's actually a great moment to put capital to work. A lot of the best businesses in the world we think are trading at very attractive prices in the backdrop of a war and uncertainty and volatility with some very strong economic undercurrents.

So this company, Pershing Square USA, is going to own basically the same portfolio as the other Pershing Square core funds that pay much higher fees and incentive fees. So it will be a very low-cost version of Pershing Square and we believe our companies are going to offer a very attractive compound return from here. So we think actually there are many companies today, the market is very disparate. There's some companies that are very highly valued. There's some stocks that are very cheap and there's some somewhere in the middle. And we are a very concentrated investor. So it's about the dozen or more, dozen to 15 companies that we own as opposed to the market generally. This is not an index fund. It's a very concentrated portfolio. We get very deeply involved in our companies. We work to help make them be more successful and we're going to perform very differently from the market. If you look over a long period of time, we've generated, you know, 19% compound return for 22 years, and it's been about 25% for the last eight, but it's not been a straight line up. You know, it's volatility. So investing with us is, you know, we're looking for people who want to be an investor for the long term. We think we'll do very well over the long term, but I can't tell you how we're going to do over the next 90 days.

So, this is going to be a replica of our existing portfolio. We also have some investments we have not yet publicly disclosed. So if you look up the other Pershing Square, there's a lot of disclosure about companies we're invested in. I've been advised today not to talk about specific companies. But it will be our core holdings.

So Chipotle sold. Alphabet's gone. So it's actually a pretty refreshed portfolio.

Day one, you're investing in a pile of cash. We're going to deploy that, this is Pershing Square USA, we're going to deploy that capital in very high quality, what we call super durable growth companies. The risk is, you know, are we going to invest in the right companies and are we going to be successful in helping them succeed? You know, I would look at our track record over, you know, a couple decades to form a conclusion about that. Pershing Square Inc. is an asset management business. It has very different risks than a typical asset management business because 98% of the capital we manage is in these permanent capital vehicles. The typical asset management firm, the risk is that the investors take their money. That's not a risk in our business because the money stays in these entities because they're corporations. Investors if they want to add more, they buy stock. If they want to exit, they sell stock. But the capital stays. So the risk for the business is what kind of returns are we going to generate over the next 5, 10, 15, 20 years. You know, I think we've had an incredible run over the last eight years. We're probably the best performing, certainly the best performing as a closed-end fund, by far the best performing. Average closed-end funds generated a 7% return per annum over the last eight years. We've generated a 25% return per annum over the same period.

Sure. So, had you invested in the S&P in January of 2004 when we launched, and you invested $10,000 back in 22 years ago, at the end of last year, you would have had $90,000. That sounds pretty good. But had you invested in Pershing Square USA, in our strategy, the fee structure across our various strategies, you would have had, you know, $460,000. So we've compounded... no, that's all fees, net of all fees. So our net returns have vastly outperformed the S&P over a very long period of time. So that's why, that's the difference. Now can you buy stocks after we disclose them? Of course you can. But you can't buy them at the price we acquired them at. And we did analysis years ago. And the average increase in price over the last, you know, 20 something years that you would have had to pay versus the price we acquired the stake at, you're paying a big premium. Because the market responds generally when we announce a stake in a company and that day the stock goes up a lot and we're able to accumulate it in the months prior without having to make a disclosure. So one, you get our cost as opposed to what you have to pay when a stock starts trading. And second, we also hedge risk. So, one of the things that we're best known for is buying big stakes in well-known public companies and helping solve problems like Chipotle is a good example or buying Hilton when the market, I would say, underappreciated the business. But the other thing we do is we look for what we call black swan risks. Beginning in 2005, we started seeing AAA rated companies guaranteeing subprime obligations. We said this is not going to end well. And we bought an instrument called a credit default swap. Sure. Of course you're very well known for that. It was a way for us to bet against that risk and when the markets blew up we made a fortune relatively speaking. We took that capital and we bought stocks. And then a decade later in February 2020 our concern was COVID. We said look this is going to be a pandemic, it's going to have significant economic effects. We bought a very, like a hedge, we bought 74 billion of this CDS index hedge. We made $2.6 billion in 10 days and then we took the money and we bought stocks. And then we did something similar nine months later when we said look we're going to have massive inflation. We bought an instrument called an interest rate swap that enabled us to hedge, made 2.6 billion on interest rate swaps. This will be the first investment fund a retail investor can invest with in history that has that capability and that hedging capability.

The answer, well why did people, why did we raise 5 billion in the IPO? Why did people sign up in advance to raise the... the answer is not only did they get a pile of cash in an investment vehicle with a good long-term strategy but they also received an interest in our business for free. And Pershing Square Inc. is an amazing business and I expect it to compound in value at a very nice rate over a long period of time. But I think there's really never been a bad time to invest in Pershing Square as long as you have a long-term horizon.

I think it's justified.

I think the economy is going to be very strong. And I think the kind of second half of the year in particular, and part of that relates to just kind of policy, right? We have this tax bill that's going to be very pro, it is very pro investment. We have a president that's made deals with lots of different countries using tariffs and other levers to get them to commit to open factories here. We have a massive AI infrastructure buildout. We have a massive energy infrastructure buildout. All of these things are pro economy. And then AI itself is this very powerful productivity force. Every company today is trying to figure out how to use AI to enhance their business. And so there's a very large, you know, enormous tailwind. And when you look at the S&P 500 and you say oh it looks expensive historically, you have to look at the composition of the companies. You know today we have some of the biggest companies in the world growing at the fastest rate. Usually in the old days only small companies could grow as fast as some of the biggest companies in the world today. And that's a very significant difference in terms of the composition of the index. So I think the overall, I think index funds are great. Yeah, I think and I think they will likely continue to do a good job. But we pick the best of the S&P 500. We own 10 companies, 12, sometimes 15, and even among those, we concentrate the top three, the top four can be half the portfolio. So, we're doing a lot of research on the companies we invest in. We're investing in businesses and helping make them more successful. So, that's why we've been able to beat the market over a long time.

I've been advised today not to talk about individual positions, but I think sector, I would say, I would say people are underestimating how strong the economy could be this year.

Every company. Every company.

You know, I think we're beyond the place for an adverse outcome in Iran. I think getting that resolved is really the one remaining overhang on the market. I think we resolve the war in Iran, energy prices start to come down, the Fed can get more constructive on lowering interest rates. And I think, you know, rates are really too high. I understand the Fed not wanting to lower rates at this moment because with, you know, energy, the problem with energy, higher energy prices is it sort of bleeds out into other parts of the economy. You know, fertilizer costs affect the cost of food. So I think that's kind of the one issue that needs to be resolved to have a real take.

The answer is it's less about what the highest level is and how long it stays there.

The market and the economy can absorb spikes. But you know, oil in the mid-$100 range for an extended period of time would not be good. That's probably the biggest risk for the economy.