Billionaire investor Bill Ackman recently made headlines by announcing the postponement of the highly scrutinized listing of Pershing Square’s U.S. closed-end fund. The initial public offering of Pershing Square USA Ltd., with the ticker PSUS, has been delayed until a date to be announced. Ackman is now looking to raise $2.5 billion to $4 billion for the fund, which is significantly lower than the initial $25 billion target. This delay comes as a surprise to many in the financial world and has raised questions about the fund’s future success.
Closed-end funds like Pershing Square’s U.S. closed-end fund sell a set number of shares during their IPO and trade on market exchanges after their debut. However, the price of the fund may not necessarily match the shares’ net asset value, leading to the fund trading at a premium or a discount. Bill Ackman acknowledged the sensitivity to the size of the transaction, especially given the unique structure of closed-end funds and their history of negative trading. Investors will need to carefully analyze and judge whether the fund will trade at a premium post-IPO.
Pershing Square, under the leadership of Bill Ackman, had $18.7 billion in assets under management at the end of June. Most of its capital is held in Pershing Square Holdings, a $15 billion closed-end fund that trades in Europe. Ackman’s plan to offer a similar closed-end fund listed on the New York Stock Exchange aims to pave the way for an IPO of his management company. The publicly traded closed-end fund is expected to invest in 12 to 24 large-cap, investment-grade, “durable growth” companies in North America.
In a roadshow presentation, Ackman highlighted the challenges of managing traditional hedge funds where investors can withdraw their funds at any time. This constant fundraising and need to soothe investors can negatively impact returns. By managing permanent capital through a closed-end fund, Ackman aims to focus more on the portfolio and take a long-term approach to investments. This strategy allows him to be a long-term investor in businesses without the constant pressure of managing a portfolio where money can flow in and out unpredictably.
The challenges faced by billionaire investor Bill Ackman in postponing the listing of Pershing Square’s U.S. closed-end fund and the unique structure of closed-end funds pose significant hurdles for the success of the fund. However, Ackman’s strategic approach to managing permanent capital and focusing on long-term investments may prove to be beneficial in the long run. Investors and analysts will be closely watching the developments of Ackman’s fund in the coming months to see how these challenges are overcome.