By Andrew Bary
Despite a rocky debut this past week, Bill Ackman's new stock-picking fund looks like the best way to invest alongside the famed billionaire.
Shares of the closed-end fund, Pershing Square USA, came public with a thud on Wednesday, falling 18% from their offering price of $50, to around $41, in initial trading on the New York Stock Exchange. They rallied 4% Thursday to $42.71.
Ackman's star power -- including two million followers on X -- weren't enough to ensure a strong reception for the deal in a market where investors favor low-cost and tax-efficient exchange-traded funds. Closed-end funds like Ackman's, which tend to trade at discounts to their net asset values, have been tough sells for several years.
With the deal, Ackman now oversees an investment empire that includes two publicly traded equity funds, a publicly traded asset manager, and a publicly traded real estate company that he wants to transform into a "modern-day Berkshire Hathaway." Each of those offer investors an opportunity to align with Ackman, one of Wall Street's most prominent figures.
Here are the four investment vehicles: There's Pershing Square USA, which raised $5 billion from investors this past week, and Pershing Square Holdings, a $15 billion-in-assets European closed-end stock fund with a U.S. listing under the ticker symbol PSHZF. Then there is Ackman's investment management firm, Pershing Square Inc., which he took public in connection with the new closed-end fund. And finally there is Howard Hughes Holdings, a real estate company that Ackman is using as a platform to build a small-scale Berkshire.
Barron's ranks the new fund as the most promising of the bunch. It offers a way to invest at a discounted price in a concentrated portfolio of what likely will be a dozen high-quality growth stocks.
As a closed-end fund, Pershing Square USA issued a fixed number of shares, which now trade on the NYSE. Closed-end shares can trade at a discount or premium to portfolio value, based on investor demand. We estimate the current discount at about 12% at a stock price of almost $43, given that the fund started with about $49 a share of cash to invest, after deducting underwriting fees on the deal.
Most closed-end funds trade at discounts to their portfolio values, in part because investors can't redeem shares from the manager. That means the Pershing Square USA discount could persist. One negative is a high annual management fee of 2%, creating a hurdle for Ackman to top low-fee index funds.
A confident Ackman told CNBC that his fund heralded a "rebirth" of closed-end funds. That's an overstatement. His deal got done because he offered investors a bonus of one share of his management company for every five shares purchased of Pershing Square USA.
Ackman has said that the investments in the new fund likely will be similar to those in the European closed-end fund, which holds such stocks as Amazon.com, Alphabet, Meta Platforms, Brookfield, Uber Technologies, and Restaurant Brands International.
Ackman has a strong record over the past eight years, handily topping the S&P 500 based on his European fund. But he's behind the index this year by about five percentage points based on recent results. Assuming Ackman can return to form, investors would generate good returns.
Howard Hughes, the next-most-appealing Ackman vehicle, is a work in progress. It could take several years for the Ackman transformation to take hold, but investors now can buy into it at a depressed price.
The shares trade around $62, near a 52-week low and way below a high of $91 in November. The market value is about $3.5 billion.
Two positives: Investors can buy the stock at a big discount to the $100 a share Ackman paid for nine million shares nearly a year ago, when he took control of the company; his firm now owns about half the stock. And Howard Hughes has valued its real estate portfolio at over $100 a share.
The company owns a mix of real estate, including office and multifamily, and sells land to home builders for development in several markets, including Houston, Las Vegas, and Phoenix.
"The stock market never gave it the value it deserved," Ackman said in a recent investment presentation. The problems, he said, include a diversified real estate portfolio in a market where investors like focus, a lack of a dividend, and lumpy earnings.
As part of the Berkshire-style transformation, Howard Hughes agreed to buy a property-and-casualty insurer, Vantage, for $2.1 billion in a deal that is due to close in the current quarter. The strategy is to harvest cash flows from the real estate portfolio and write more insurance policies and make investments. If the strategy gains traction, the stock should appreciate .
We rank the Pershing Square Holdings fund as third-most-promising part of the group. It is a European version of the new Ackman fund. It has been around for more than 10 years. It trades mainly in London and lightly in the U.S. under the ticker PSHZF, at around $57 a share.
The appeal here is that shares trade at a big discount of about 30% to the portfolio value.
The negatives are a high fee structure -- a 1.5% annual base fee and an incentive fee of 16%, with no hurdle rate. It's also more complicated from a tax-reporting standpoint for U.S. investors, and some brokerage firms don't let their retail clients buy it because it's an overseas fund.
Finally there's Ackman's management company, Pershing Square Inc. It looks richly valued relative to other alternative-asset managers, like Blackstone or KKR.
At Thursday's price of $28 a share, the firm is valued at $11 billion with about 400 million shares outstanding, and it now has some $20 billion in fee-paying fund assets. Its ratio of assets to market value is high compared with peers. Its market value looks high, at 30 times its base annual fees. The main positives are high profit margins and a sticky asset base.
Pershing Square has key-man risk, given that the 59-year-old Ackman is critical to its success and its ability to raise new money.
In short, it may be best to steer clear of the firm. Stick with the new fund and Howard Hughes.
Write to Andrew Bary at andrew.bary@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
May 01, 2026 02:00 ET (06:00 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments