The Ackman Complex

“May I meet you?” — Bill Ackman, 2025 Most hedge funds cultivate exclusivity. Try getting capacity in Chris Hohn’s TCI without a private bank relationship or an endowment pedigree and you’ll likely hit a wall. Many have skeletal websites or none at all; the one where I used to work didn’t even put its name on the door. Scarcity enhances the brand. Pershing Square is different. Since losing most of its legacy assets after four consecutive down years between 2015 and 2018, the majority of its funds come from a London-listed entity, Pershing Square Holdings. Of the $16 billion in equity capital the firm currently manages, $14 billion sits in London. And anyone can access it: a single share of Pershing Square Holdings trades on the London Stock Exchange for £44.06 ($60.11). As a result, the firm’s investor base includes everyone from pensioners to pension funds. This week, hundreds gathered at the firm’s annual investor presentation at London’s Chancery Rosewood Hotel, housed within the former US Embassy on Grosvenor Square. Descending several stories below ground level into what was formerly a CIA safe room, shareholders settled in for a two-and-a-half-hour presentation. Bill Ackman couldn’t attend due to a family medical emergency but he joined remotely, leaving CIO Ryan Israel to lead in person alongside a team of analysts. Having delivered 20.9% after fees last year (even if down 5.4% so far this year), they faced a largely satisfied room. Yet even as the fund has shed its exclusivity, so has its portfolio. The team presented a largely unchanged portfolio of 13 stocks, all of them known and readily accessible to investors. The latest addition – a 10% position in Meta – adds to Amazon and Alphabet to push exposure to Mag-7 above 30%. No shorts, few special situations beyond stakes in Fannie Mae, Freddie Mac and a 2% position in Hertz. Just a handful of liquid, mega-cap names. Ackman explained that while mega-caps had historically been out of reach for the fund due to high valuations, sudden selling waves had created opportunities. He pointed to structural changes in markets: the growing weight of index funds reducing tradeable float, and the rise of multi-strategy hedge funds focused on short-term events, both amplifying volatility. His focus on intrinsic business value and what he calls “time arbitrage” gives him an edge when mispricings emerge. They don’t last long, but liquidity in these names means he can act quickly – particularly given the firm’s library of accumulated research. The team bought Alphabet at 16x earnings amid AI disruption concerns, a 40% discount to its current multiple, and Amazon at an all-time low valuation during the tariff sell-off. Ackman echoes Chris Hohn’s view, too, that bigger can be better. “We believe most of the top ten companies have sustainable competitive moats and long-term secular growth characteristics,” he states. He expects Amazon, Alphabet and Meta to grow earnings at 18-20% over the medium term, versus 8-9% for the S&P equal weight. But asking investors to pay high fees for this portfolio can be a stretch. The fund charges a management fee of 1.5% and a performance fee of 16% with no hurdle rate of return. Last year, investors paid $700 million in total fees to the Pershing Square management company. That’s a lot to pay for buying the dip. In the eight years since the firm restructured around its listed entity, fees have consumed 4.8% of return per annum. Over the period, that’s the difference between a 7.2x gross return and a 5.3x return net of fees. In the past, Ackman has argued that the fund wrapper offers sufficient advantages to justify the fees. One is that his positions often pop when disclosed, meaning shareholders capture gains that investors mimicking his portfolio would miss – though after revealing his Meta stake this week, the stock barely budged. Another is his “asymmetric hedging strategy” which paid out handsomely during Covid and when interest rates rose. Here, he concedes that no “black swans” appear imminent, and the market for cheap, asymmetric trades looks thin. Buying the fund does offer the advantage of a discount – it currently trades 22% below the value of its underlying holdings – but there is no guarantee it will narrow and any widening injects further risk. Since last year, though, an alternative has emerged for those wanting to invest alongside Ackman without paying such high fees. In May, Pershing Square’s management company took a 15% stake in Howard Hughes Holdings, adding to the 32% already owned via Pershing Square Holdings. With effective control, Ackman set out to transform it into a vehicle to operate alongside his listed entity. While it would be subject to management fees, Howard Hughes is exempt from traditional performance fees. “We didn’t do it for free – we are in the investment management business – but we did so on, I would say, the best terms we’ve ever offered an independent pool of capital,” said Ackman. Initially, Howard Hughes’ primary asset was a real estate business – quite different from the holdings inside Pershing Square Holdings. But, just before Christmas, the company announced the acquisition of an insurance company, Vantage, with some financing from Pershing Square Holdings. And, as students of Warren Buffett know, insurance companies come with capacity to invest in stocks. Ackman plans to grow this new pool of capital without charging additional fees – “the best deal ever in the insurance industry,” he says. As Warren Buffett steps back from Berkshire Hathaway this year, Bill Ackman is building his own version. The admiration runs deep – Ackman has asked questions at Berkshire annual meetings on at least four occasions and held shares through Pershing Square. We’ve covered this Buffett obsession before, but now he’s put his money where his ambition is: an insurance company acquisition that mirrors Buffett’s 1967 playbook. The structure, though, reveals something more complex than simple imitation – and raises questions about what investors are really paying for. To understand the Vantage deal, the fee mathematics and why similar experiments have failed, read on.