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 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 by today.
So, as I mentioned, this has been years in the making, at least 2 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? 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 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. 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. They're interestingly some of the best businesses in the world that are trading at the lowest multiples they've traded at in some cases in history. Actually, those multiples bottomed maybe 2 weeks ago, so we're a little bit off 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 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, and 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. So, 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.
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 19% return on equity for the last 22 years. If you look in Bloomberg, do someone want to do a search real time. Find me a business that's earned 19% of equity for the last 22 years that 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, at if we do anything like what we've done in the past, at 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-end funds are kind of a backwater. No one actually wakes up and gets excited about investing in 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 on a... They don't hold conference calls with their shareholders. They don't have particularly distinguished boards of directors. Or if this were a C-corp, no one would be asking me whether it should trade at a discount or not.
But, you 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. It'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 8 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 is, you know, about 10% per annum. So, 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...
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 holdco, 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. 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 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 Pershing Square, the management company, or 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 KKR or the other sort of alternative asset 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 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, because these are huge platforms that have many different types of assets they invest in?
Of our strategy, we invest in the largest companies in the world, kind of large-cap, mega-cap companies, mostly based here. We're tiny in the context of the capital markets. We manage money in a concentrated fashion, but with 25 billion of capital, couple billion dollars per investment, that's small in the context of the market we invest in.
By the way, and, you know, 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 you. 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, believe it or not, I've been very constrained on social media. I don't... 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 closed-end fund, we're not allowed to talk about it in America. Right. And this is 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, you know, we make an investment, we can say today we bought a 10% stake in company ABC. Here's why we own it, ticker symbol PSUS. And 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, were very supportive of Tesla over time. It 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.
It does sometimes make for more volatility though, when a post can potentially move around share prices. Sure. How do you think about that?
I mean, we're only going to post stuff that's true.
