The range of trusts offering exposure to North America is limited, so Pershing is a core holding
Max King Investment columnist
Funds
If anyone thought that Bill Ackman’s online activism and campaigning against anti-Semitism had distracted him from managing Pershing Square Holdings (LSE: PSH), this month’s London meeting for investors will have convinced them otherwise. In 2023 the investment return of Pershing Square was 26.7% and the shares returned 36%, while the S&P 500 gained 26.3%. And this return was earned despite owning only one of the “Magnificent Seven” stocks that drove the US market: Alphabet, bought early in the year.
Moreover, “it gets harder to beat the S&P when the S&P does well”, says Ackman, as PSH likes to protect good returns through hedging. Over five years, PSH has produced 31.2%, twice the return of the S&P 500. That was preceded by two difficult years, but since the inception of the strategy in 2004 it has returned a compound 16.4% per annum against 9.7% for the S&P 500.
That difficult patch was the result of a few mistakes as PSH strayed from its core principles. But it was followed by “a return to our roots with a more efficient, impactful team”. Two thirds of funds managed by Pershing Square had been in open-ended funds and saw significant outflows, but “the focus going forward is on permanent capital, which now accounts for 90% of funds managed”.
Ackman is working on the launch of a parallel fund in the US, but investing in 20 rather than ten “best ideas”. “It is likely to be a very successful initial public offering,” which will benefit PSH through a 40% reduction of the shares initially issued have been bought back over the years at a cost of $1.3bn and at an average discount to net asset value (NAV) of 29%.
As to the portfolio, “we own some of the best businesses in the world. We like to find companies we can own forever that are asymmetric bets” (much more upside than downside). There are just ten holdings plus hedges and options, which subtracted value in the performance fee on a $10bn fund raise. “It would be good to reduce PSH’s fees to just 1.5% per annum with no performance fee.”
PSH itself has $14.6bn of assets, of which $12.3bn is equity and the rest debt, costing an average of just over 3% and with an average maturity of eight years. PSH’s size means that it is a FTSE-100 constituent. Around 27% of the shares are owned by “insiders�
