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00:00And for our radio and TV listeners, I want to welcome Pershing Square CEO and founder Bill Ackman.
00:05Bill, thank you so much for stopping by today. Of course. Thank you. So as I mentioned, this has been
00:09years in the making, at least two years.
00:11It's had fits and starts much like this American IPO market itself. What was it like to get this over
00:16the line?
00:17It's great. It's a great day. But it's really, you know, it's the beginning, right, the beginning of a journey.
00:22So it's the beginning of a journey and now armed with five billion. How quickly can you put that to
00:27work?
00:28Actually, we think it's a very good time to put the capital to work and we invest in the most
00:31liquid companies in the world.
00:32So it's really it's weeks, not months. So it's weeks. But there's this question.
00:36So some of the companies that you own in your other portfolio, for example, Uber, Meta, they've had a good
00:42run and you're already very long them.
00:44So the question might arise, is now the right time to be doubling down?
00:48Actually, I think the companies you mentioned are very cheap stocks today.
00:51Interestingly, some of the best businesses in the world are trading at the lowest multiples.
00:54They've traded that in some cases in history. Actually, those multiples bottomed maybe two weeks ago.
00:59So we're a little bit off the the all time bottom, but, you know, very bullish on the economy.
01:03And, you know, there are some amazing businesses available at really cheap prices.
01:07This will be kind of a continuation of what we're doing now.
01:10So we're going to just add to existing positions, which will give us more ownership.
01:15And in our strategy, we'd like to be a big, big shareholder.
01:17As you said, very liquid stocks. So the market is there.
01:20What about for like a Fannie or Freddie where they trade OTC? How does that work?
01:24How do you dive back in without moving the market?
01:27We're going to be very thoughtful about the way we deploy the capital.
01:30We're not going to tell anyone on TV what we're going to do.
01:32I see. You don't want to front run anyone. Perhaps a wise decision.
01:36And look, you've discussed, you were talking about it earlier this morning on CNBC,
01:40that closed end funds, they trade at a discount to NAV. That's not a surprise.
01:44So what does success look like in this scenario?
01:46Is, for example, like a 10% discount? Okay.
01:50So I want to give you a new construct to think about.
01:52Please.
01:53Okay. So there's hundreds of closed end funds,
01:56but they're a very different animal from what we're doing here.
01:58We're adopting the closed end structure, the legal structure, the corporate structure,
02:02because it's the most flexible and most tax efficient corporate structure in America.
02:06It's never been used for the purpose that we're going to use it for.
02:09But if you think about our business as a business,
02:12think of us as an investment holding company.
02:14It's a business that's earned a 19% return on equity for the last 22 years.
02:18If you look in Bloomberg, someone should do a search real time.
02:21Find me a business that's earned 19% on equity for the last 22 years.
02:24It trades for less than two times book value.
02:26And we're taking the company public at book value.
02:29So we think that's going to be a cheap price.
02:31Now, the nature of IPOs are such that in the first couple of days,
02:34I can't tell you exactly what's going to happen.
02:36But over time, we're going to compound this book value, or NAV, as some people call it.
02:41If we do anything like what we've done in the past, a high rate over time,
02:44and it's going to compound and it's going to grow.
02:46And we're going to run it like a real company.
02:48Closed end funds are kind of a backwater.
02:51No one actually wakes up and gets excited about investing in a closed end,
02:54a traditional closed end IPO.
02:56They're kind of generic.
02:57You don't know who runs them.
02:58I bet Bloomberg's never even run a story.
03:01And they don't have conference calls with their shareholders.
03:03They don't have particularly distinguished boards of directors.
03:07If this were a C-Corp, no one would be asking me whether it should trade at a discount or
03:11not.
03:12But we can't deploy our strategy in a C-Corp, which is why we've chosen this structure.
03:18And it's more tax efficient than a C-Corp.
03:19It's a flow through entity for tax purposes.
03:21So more tax efficient.
03:23And then we fix the things that are problematic about closed end funds.
03:26So it's the lowest cost compensation for a management firm like us to manage this pool of assets.
03:31In fact, we charge our other funds incentive fees.
03:34We don't do so here.
03:35We're not permitted to do so here.
03:36So it's the lowest cost version of Pershing Square.
03:38You take our record over the last eight years since we've had permanent capital, it's been a 24.9%
03:42return.
03:43That's a very high rate of return relative even to the stock market, which is about 10% per annum.
03:51Not as well.
03:52So it's a liquid way to invest in Pershing Square at very low cost.
03:56And we're going to build the value of this entity over decades.
03:59Well, and I know you've said before.
04:00No, by the way, that's just one of the companies we took public today.
04:02That's true.
04:03And you have Pershing Square, the holding company, the hold co.
04:06And you also have ambitions to maybe list more funds.
04:09How quickly can you ramp up AUM?
04:12I know you said just by the nature of what you're doing, by compounding, that you could get to a
04:15trillion in 20 years.
04:17Do you have your own internal targets you're thinking of?
04:19So the first priority is to compound at a high rate for a long period of time.
04:23That's a much easier thing than doing an IPO.
04:25Right?
04:25FPOs can take management time and attention.
04:27So we're going to focus on investing.
04:29We're going to focus on getting our universal music deal done.
04:32We're going to focus on helping the administration figure out Fannie and Freddie.
04:37We're going to help our company succeed.
04:40And the beauty of that is it grows our AUM.
04:43And the beauty of Pershing Square, the management company, or some people call it the GP, is it grows with
04:49compounding.
04:49Other asset management firms generally only grow with raising money.
04:53If you look at a KKR or the other sort of alternative asset management firms, if they stop raising money,
04:59they shrink.
04:59Because they're constantly sending money back to their investors as they sell assets, they send money back.
05:04In our model, we build off a base.
05:06And if we're up 20%, the assets will grow about 20%.
05:10And so that's a very fast rate of growth without the need to raise any additional capital.
05:15Can you rival the size of those?
05:17I mean, I know it's a very different model, but do you see yourself growing to a size of a
05:21Blackstone, of an Apollo?
05:22Over time, for sure.
05:23And that was the point I was making.
05:25We'll have 25, today, post the closing of this IPO, we'll have $25 to $26 billion of fee-paying assets.
05:31Does the way you invest need to change then?
05:33Because these are huge platforms that have many different types of assets they invest in.
05:37The beauty of our strategy, we invest in the largest companies in the world, kind of large-cap, negative-cap
05:41companies, mostly based here.
05:43We're tiny in the context of the capital markets.
05:45We manage the money in a concentrated fashion, but with $25 billion of capital, a couple billion dollars per investment,
05:52that's small in the context of the market we invest in.
05:55By the way, and this is quite unique.
05:57As you point out, there's not really another structure that's listed like this.
06:00How are you thinking about it, though, in terms of having a listed structure, both Pershing Square and PSUS, that
06:07it is centered around you and your very small team, which I know you see that as a benefit to
06:12you?
06:12Does it change how you communicate?
06:13Does it change what you put on social media?
06:15Yes.
06:16Because it could impact share prices?
06:17It does.
06:18I guess legally is one question, but beyond that.
06:21Well, actually, believe it or not, I've been very constrained on social media.
06:24Maybe you find that a surprise.
06:26But with respect to talking about Pershing Square, there are a lot of limitations up until this moment in time.
06:32Now we have an SEC-registered entity.
06:35Our existing offshore closing fund, we're not allowed to talk about it in America.
06:39Right.
06:39And this is where I spend the vast majority of my time, so it's something we can't talk about.
06:42The beauty of this entity is we're going to be able to make an investment.
06:46We can say, today, we bought a 10% stake in company ABC.
06:49Here's why we own it.
06:50Ticker symbol PSUS.
06:52And we can keep very close touch with our shareholders.
06:55And one thing that Elon Musk has done very well over a long period of time is he built a
06:58base of followers that were very supportive of Tesla over time.
07:03It reduced the cost of Tesla stock.
07:04And that's been a competitive advantage that Tesla's had over time.
07:07We have already a very large base of followers in the capital markets.
07:12They haven't had a way to invest with us until now.
07:15It does sometimes make for more volatility, though, when a post can potentially move around share prices.
07:20How do you think about that?
07:21I mean, we're only going to post stuff that's true.
07:24I think that's a good rule to stand by.
07:27Yes.
07:27At the same time, you've been pretty early in some major dislocations in this market, be it COVID, be the
07:34inflation that followed, and some really successful hedging strategies behind that.
07:37Do you see any dislocations like that at the moment and hedging strategies you'd want to deploy?
07:44No, actually.
07:45I think we're in a pretty – we're heading into a very good place.
07:49Obviously, we have a war still underway.
07:51But I think we have by far the upper hand.
07:53I think Iran has been denuded of military capability.
07:58And I think it's only a matter of time.
08:00Administration, I think, this move of closing the strait I think was kind of a kung fu grip-type move
08:07on the part of the president.
08:08And I think it's putting a huge pressure on Iran.
08:12So I think we're going to get this resolved in the relative short term.
08:15I think that's really the biggest overhang on the market, right?
08:18You know, the closest straight obviously has an impact.
08:23You know, some – whatever, four percentage points or something of oil on a daily basis can move a market.
08:28And that has an impact, causes inflation in the short term.
08:31But I think it's a short-term phenomenon.
08:32And I think once we're through it, I do see, you know, a Federal Reserve that should be able to
08:36reduce interest rates.
08:37We have massive, you know, AI spending.
08:42We have massive energy spending.
08:43We have a tax bill that's driving investment.
08:46Every day there's however many deals that are being announced.
08:49You have administrations that are very supportive of transactions as opposed to an FTC, which would stop everything.
08:55So there's – I think you're going to see lots of reasons to be bullish on markets generally.
08:59You were pretty early in this call, posting on X, that any dips would be short-lived and they were
09:06–
09:06I didn't say any dips.
09:07I was very – I basically called a recent bottom, let's put it that way.
09:11I thought stocks were getting stupidly cheap.
09:13So I just sort of called it out.
09:14They didn't even sell off 10 percent.
09:15I feel like some people feel uncomfortable with that.
09:17I think oil today is trading somewhere around 116 and stocks feel unbothered.
09:22You can't think about stocks – you're thinking about stocks from an index perspective.
09:26Okay.
09:27The index is like looking at the surface of the ocean.
09:30I mean, sorry.
09:31The index is like looking at inside the ocean, but the surface is moving around a lot.
09:36And what I mean by that is there are a lot of stocks – there's enormous disparity in terms –
09:42there's enormous volatility.
09:44We have a lot of earnings coming out in the next 24, 48 hours.
09:47And you can see massive moves in different directions.
09:51There's so much capital leveraged, short-term focused, tightly risk-managed, which means stop losses and things like this.
09:59And the result of that is that our capital markets, you can see massive moves in share prices.
10:03If you have the ability to be long-term, every once in a while, you know, the price of a
10:08really high-quality company gets stupidly cheap because someone gets – you know, is forced to sell because of a
10:13bad print for the quarter or a guidance change.
10:17Really something that doesn't necessarily have any material impact on the long-term business.
10:20And those are the kind of dislocations we take advantage of.
10:23But the dislocations, it sounds like, are over.
10:25The stupidly cheap moment has come and passed.
10:27Is that fair?
10:28I would say we're above stupidly cheap bottom.
10:31But I still think there are a lot of very high – like the way we sort of model each
10:35of our companies, we build a model.
10:37And we were – our kind of go-forward next three-year IRR was something north of 30% at
10:43the bottom.
10:43You don't see that with really high-quality companies.
10:45It's probably now in the mid-20s.
10:47But it's still a very high rate of projective return for some of the best businesses in the world.
10:53And that's suggestive to me the market's cheap, or at least cheap.
10:57Some of the – this is a case where the highest-quality companies are cheap.
11:00I'm not saying that energy companies are cheap today.
11:03Sure.
11:03So you have to avoid value traps, essentially, in this market as it stands.
11:07I think that's a generally good idea.
11:09True of any market.
11:10Fair enough.
11:11You know, in this sort of quest to build a Berkshire Hathaway-type model – so you've listed these two.
11:17Let me clarify.
11:18Sure.
11:18Because I think there's a little confusion.
11:20So we're building an asset management firm that has some of the similar attributes to a Blackstone and KKR.
11:26But it's extremely investment-centric.
11:29We're going to grow this business principally by compounding as opposed to raising lots of funds.
11:34So that's one.
11:35Buffett was not in the asset management business.
11:37Buffett was building a corporation over time.
11:40We have a company called Howard Hughes Holdings.
11:42We bought an incremental stake in about a year ago.
11:45I became executive chair.
11:46Our CIO, Ryan, became CIO.
11:48The full Pershing Square team became available to the company.
11:50And that's the company we talked about, about building a modern-day Berkshire Hathaway.
11:54And the first step we took was we signed an agreement to buy a company called Vantage Holdings.
11:59That deal is going to close in the next, you know, call it 60 days, something like this.
12:05And we're going to manage the assets of that insurer.
12:08And we're going to work with management to make sure they underwrite a very high-quality, profitable insurance business.
12:16If you look at Berkshire over the last 60 years, it's built most of its value running, becoming effectively an
12:22insurance-holding company.
12:23That's what Buffett has built over time.
12:24And it was his successful management of the assets.
12:27So when you heard Buffett buying Apple, it wasn't Buffett buying Apple.
12:31It wasn't even Berkshire buying Apple.
12:32It was the Berkshire insurance subsidiaries buying Apple.
12:35And we're going to do the same thing.
12:36We're going to manage this.
12:37So the goal of Howard Hughes is to build a long-term, diversified holding company akin to what Buffett has
12:43done over a long period of time.
12:45And sort of defining what, you know, your various holdings and your investments look like and what they're not.
12:50I know one distinction you've made very clear, because there have been these nerves around retail funds.
12:55But it's been really centered around BDCs and private credit.
12:57And you've really drawn a distinct line that these are not – there's no exposure there.
13:01Correct.
13:02I wonder if part of that, though, is skepticism of the asset class itself.
13:06Is there any skepticism of that asset class?
13:09Of private credit generally?
13:10Yes.
13:11Look, any time you have an asset class grow very, very quickly with a lot of participants competing, you know,
13:17return – you either have to accept lower returns or more risk.
13:20That's the only way you can kind of grow in that environment.
13:22And there's – like everything else, there's a continuum of quality in terms of sponsorship.
13:27I don't think there's inherently something wrong with private credit.
13:30I think the one thing I would say is investing in illiquid assets, you really should have very long-term
13:39capital or permanent capital.
13:40And here you are on your quest to obtaining more permanent capital.
13:44There's so much capital is managed where the underlying asset is long-term.
13:49A company, a stock, is a long-term asset.
13:52Right.
13:52The vast majority – what's caused the stock market to behave the way it does is the vast majority of
13:57asset management firms have very short-term money.
13:59They have money that can leave in a minute, an ETF.
14:02They have money that can leave overnight in a mutual fund or even a hedge fund.
14:07You know, when we bulk of our assets were hedge funds, about half the money could leave every year.
14:12It's hard to be a long-term investor if your money can leave overnight.
14:15So one of the arguments for that, though, of being able to redeem is just you're accountable to shareholders.
14:22How do you keep that?
14:23How do you keep accountability to shareholders when they're not able to redeem assets out of the fund?
14:29Shareholders have more liquidity than they do in any fund because they have a stock that trades and they can
14:32buy and sell over time.
14:34What needs to go right on the flywheel?
14:35Because if you do have any sort of discount to NAB, does that make it more difficult to list other
14:39vehicles like this?
14:40We're going to focus on doing a great job for the PSUS shareholders.
14:44And if we do a great job, we communicate to them well, we deliver the kind of performance we have
14:48over time, we deserve to trade at a premium as opposed to a discount, right?
14:52Again, the average closed-end fund, the best-performing closed-end fund over the last eight years generated a 14
14:58.5% return.
15:00At the time, we generated a 24.9% return.
15:02That's a huge disparity.
15:04And by the way, that fund trades at a 15% discount.
15:06Sorry, 15% premium.
15:08Do you think you could trade at a premium?
15:10Here's my argument, right?
15:12Businesses that earn the kind of return that we have generated over time trade at two to three times book
15:17value.
15:18Should we trade at a discount to book value?
15:19It makes no sense.
15:20And we have a tax advantage, right?
15:22We have a favorable corporate structure, much more flexible, much more tax-efficient, liquid.
15:27Listen to the New York Stock Exchange.
15:29I mean, put aside, I don't know what happens in the first couple of days after an offering, you know,
15:33but with good shareholder communication, keep people informed, good performance, this can become a core holding.
15:39And by the way, the bulk of this entity is sold to very long-term holders.
15:44Right.
15:45And so, now, with so much of the stock held by long-term holders, it's the marginal buyer and seller
15:51that will move the price around.
15:54By the way, are you as excited as everyone else is about getting to hear from you quarterly now when
15:57you give quarterly updates?
15:59Or do you wish it was semi-annually?
16:01No, no.
16:02I'm very happy to do.
16:03I enjoy communicating.
16:04And I certainly enjoy communicating with people who've entrusted their, you know, future to us.
16:10Yeah.
16:11We actually operate, you're not as aware of this, but today we do quarterly conference calls for our existing vehicle.
16:16Sure.
16:17We're not going to be able to do them onshore.
16:19Yes.
16:19We'll be able to answer questions from shareholders the way that you would want those questions to be answered.
16:23We're very much so looking forward to that, Bill.
16:24Thank you so much for your time this morning.
16:26We appreciate it.
16:27Bill Ackman, CEO and founder of Pershing Square.
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