BKAMF - Pershing Square Holdings Full Year 2024 Letter To Shareholders

2025-04-25 08:15:00 ET

Summary

• Pershing Square Holdings NAV increased by 10.2% in 2024, outperforming its share price growth of 8.3%.
• Investments in Nike, Brookfield, and Uber diversified the portfolio.
• Share buybacks and an Euronext delisting were conducted to enhance shareholder value.
• Long-term focus remains on quality businesses yielding stable returns.

In 2024, Pershing Square Holdings ( PSHZF ) generated solid but not spectacular NAV performance of 10.2%, and a 8.3% total shareholder return because of the widening of PSH’s discount to NAV during the year, largely due, we believe, to the postponement of the Pershing Square USA, Ltd. ( PSUS ) IPO, which many PSH investors viewed as a potential catalyst for reducing the discount.

Investors who invested in Pershing Square, L.P. at its inception on January 1, 2004, and transferred their capital account to PSH at its inception on December 31, 2012 (“Day One Investors”) have grown their equity investment at a 15.9% compounded annual NAV return over the last 21 years, compared with a 10.0% return had they invested in the S&P 500 over the same period. ^6,7 With the magic of compounding, our 15.9% compound annual NAV return translates into a cumulative total NAV return since inception of 2,172% versus 654% for the S&P 500 over the same period.

Using PSH’s stock price return rather than per-share NAV performance, Day One Investors have earned a 14.0% compounded return, a 16-times multiple of their original investment. ⁸ This lower return reflects the 30.9% discount to NAV at which PSH’s stock currently trades. ⁹ Our strong preference is for PSH’s shares to trade at or around intrinsic value for which we believe PSH’s NAV per share is a conservative estimate.

How We Think About the Last 21 Years

We believe the history of Pershing Square is best understood as being comprised of three distinct periods: The first nearly 12 years of our business during which we earned a 20.9% compound return from inception on January 1, 2004 until July 2015 (the Open End Fund Era), followed by a two-plus-year period of substantial underperformance (the Challenging Period) that we have previously described in great detail (See 2021 Annual Letter p. 7), and the last seven years, which we refer to as the Permanent Capital Era. ¹⁰

Over the last seven years of the Permanent Capital Era, we have generated a 22.2% compound annual return. ¹¹ We believe that our strong results are directly related to the decision we made in 2017 to stop raising capital for our two open-ended funds – Pershing Square, L.P. and Pershing Square International, Ltd. – which has had the effect of substantially stabilizing our capital base. As of January 1, 2025, PSH represents 90% of our assets under management, 27% of which is owned by affiliates of the investment manager. ¹² Our private funds, which comprise 10% of our assets under management, also have highly stable capital as affiliates of the investment manager represent 36% of their capital, with the balance held by long-term Pershing Square investors, many of whom have been limited partners since our earliest days.

The benefits of permanent capital are empirically demonstrated by our strong absolute and relative returns during the last seven years, a particularly challenging time for most equity investors as Covid, the Federal Reserve’s rapid increase in interest rates, and heightened geopolitical and macro risks led to a challenging market environment. Having the ability to invest without regard to capital flows – inflows as well as outflows – is an enormous competitive advantage in a world in which nearly all of our competitors operate with capital that can be redeemed on an annual, quarterly, monthly, or even daily basis....

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