Pershing Square funds slide 10% as Ackman's strategy trails S&P 500

Bill Ackman's flagship fund is down 10% this year while his new $5 billion US vehicle trades at a 20% discount to its IPO price.

Pershing Square Holdings has fallen 10% year to date through June 9, trailing the S&P 500's 8% gain, as billionaire Bill Ackman's bet on quality growth stocks misses the rally in memory-chip shares that has powered the broader market over the past year.

"Both funds are buys now, at current discount levels," said Eric Boughton, portfolio manager at Matisse Discounted Closed-End Fund Strategy, which invests in discounted closed-end funds.

Ackman's newer vehicle, the nearly $5 billion Pershing Square USA (ticker: PSUS), closed Monday at $39.68, more than 20% below its April IPO price of $50 and roughly 15% below its most recent net asset value of about $47. The fund has deployed about 85% of its capital across 12 companies including Amazon, Microsoft, Uber, Meta Platforms, Brookfield, Restaurant Brands, Fannie Mae and Freddie Mac, Ackman disclosed in a post on X. Pershing Square Holdings, the larger European-listed fund with roughly $13 billion in net assets, trades at about a 30% discount to its NAV.

The wide discounts show a structural challenge for Ackman: high fees. Pershing Square USA charges 2% annually with no incentive fee, while the European fund levies a 1.5% management fee plus a 16% performance fee — roughly double the typical 1% charged by most US closed-end funds. If the discounts persist, they could pressure Pershing Square's asset base and deter new investors, particularly as index funds and ETFs charge a tenth of a percentage point or less each year.

Performance gap widens to 25 points

Pershing Square Holdings trailed the S&P 500 by about 25 percentage points for the 12 months through May 31. The fund has lagged the index over the past five years but remains ahead of it over a 10-year horizon, according to the fund's website. Two of Ackman's largest holdings, Meta Platforms and Uber, have each fallen about 10% this year, weighing on both funds' returns. Both stocks rallied Monday — Meta gained 4.8% and Uber rose 5.8% — which should show in the funds' performance reported Thursday.

Ackman said in his X post that the PSUS portfolio is "invested in a number of the highest quality durable growth companies in the world, which are trading near their all-time lowest valuations." He added that buying PSUS at its current price means acquiring the portfolio at a "double discount" — roughly 20% below the fund's NAV.

Boughton said Pershing Square Holdings is the better buy of the two, given its roughly 30% discount to NAV last week. The European fund's shares trade lightly in the US under the ticker PSHZF.

This article is for informational purposes only and does not constitute investment advice.