00:00So he's bringing a closed-end fund, so raising some permanent capital, as Wall Street loves to
00:04do these days. And as part of that deal, they're distributing shares of Pershing Square proper,
00:10which is the hedge fund, which manages the strategies. So that deal is expected to price
00:14tomorrow. My colleague, Anthony, he is broke, that they're expecting to price it at $5 billion.
00:19Keep in mind, a few weeks ago when they launched this process, excuse me, last week when they
00:22launched this process, they said they would raise $5 to $10 billion. So at the bottom of that range,
00:27and if you think back two years ago, without the sweetener of the hedge fund, they wanted to raise
00:32$25 billion. That ultimately was pulled. So this has been a few years in the making, but it does seem
00:38like we'll cross that finish line tomorrow. Which part of this offering do investors want more,
00:42the closed-end fund or the exposure to the hedge fund? Hedge fund. I mean, closed-end funds
00:47historically, or at least recently, have traded at discounts. The London market, where he currently
00:53has a closed-end fund, trades at a wider discount than here in the U.S. But just for reference,
00:59that right now, according to our data, is at a 32% discount. So you're talking about buying something
01:05that if you have the long-term vision in Bill Ackman and Ryan Israel and the team at Pershing
01:09Square, you can buy it now and you hold on to that closed-end fund for as long as you
01:13want,
01:13and you at least get access to Pershing Square, the management company, in the interim.
01:18Is that discount, that 32% discount, is that bigger than typical? Yes. So why is that? Why
01:24is he getting a discount? Why is he having a hard time pushing out this deal in the U.S.
01:29market?
01:29Well, it's wider because these things are more thinly traded in the U.K., in Europe. So that's
01:36one part of it. It's also the fact that these are essentially going to be identical products.
01:40So if you're an investor, why would you not cut a check today to get in at least at NAV
01:45and then
01:46get the bonus shares? I mean, the counter argument is, why would you not buy something that's 32%
01:50on sale, which is also fair? The other argument, when you talk to folks in the closed-end fund
01:55space, is the only reason to get an incremental buyer is someone who believes in the vision going
02:00forward. So define first what a closed-end fund is. Everyone knows what an ETF is. It's essentially
02:07that, except for you can't withdraw your money. So if you buy, you participate in this at $50,
02:12you can sell it in the market. It's like these BDCs and other products that are permanent
02:16capital. You buy it, you can pay the sticker price, if you will, but you don't get access
02:20to what the underlying assets actually are worth. So if you buy it at $50, it trades at
02:24a 10% discount. You turn around and sell it at $45, you lost $5. But if you buy the
02:28Pershing
02:29Square London deal at a discount or buy it today, you don't necessarily care about the discount.
02:34You just care where you can turn around and sell it in a minute, a day, a year.
02:38Just remind us again about what Bill Ackman's investing thesis is, because he was one of
02:44the most vocal activist investors. We can all remember Herbalife and what he tried to
02:48do there and didn't get done. But he's not really pursuing that path anymore, is he?
02:54No, he's become kind of a relatively long view, taking a longer view, I guess you could
02:59say. I mean, the counter-argument is he has exposure to Brookfield. He has exposure to Howard
03:03Hughes, which has been a big position in the company. Also loves the technology companies,
03:06Amazon Alphabet has been backing and tweeting ad nauseum about Fannie and Freddie and what
03:11they can bring.
03:12Yes, always.
03:12So not necessarily your old school activist where you come out with some reports and go
03:16head to head with management, now kind of taking a longer view. And again, the counterpoint
03:21from some investors is, if I get paid to invest money, why am I turning around and paying a fee
03:27to invest in someone else who's investing money? And when you look at the portfolio, yes, he's
03:31had some big winners and has done well in the long run. But Amazon, Alphabet, Uber, Universal
03:37Music Group, they aren't, according to some people I talk to, necessarily novel names that
03:42are kind of under the radar, if you will.
03:44So I guess just 30 seconds left, how has his performance been? I mean, has it been?
03:50Depending on their data, pretty good. But if you use the London-based closed-end fund as a
03:55comp relative to the US market, it's underperformed on, I believe, a one-year and two-year. Longer
04:00out has outperformed. It kind of just depends where you slice and dice that. But all things
04:05considered, it comes back to the whole debate around, do you want active money or do you
04:08want passive money? It's really hard to outperform the S&P 500 right now.
04:13Yeah. And this is going to be mostly institutional money?
04:15According to Anthony's scoop, about 85% institutional, 15% retail. But still, if you do that math, it's
04:22about $750 million of retail money. So not a poor performance by any stretch.
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