Bill Ackman's stock-picking funds are trailing the broader market so far this year. He's hoping a portfolio makeover, including fresh bets on companies such as Netflix and Visa, can help turn things around.
The billionaire investor held his first earnings call Thursday since he staged a simultaneous public listing of a new fund, Pershing Square USA, and his management company, Pershing Square.
Pershing Square USA, known by its ticker PSUS, gained only 0.6% on its investments since its debut in late April through Tuesday. Meanwhile, his London-listed fund, Pershing Square Holdings, lost over 4% this year through Tuesday, compared with a 13.7% total return for the S&P 500 over the same period.
His funds sat out the rally in the shares of chip makers and other providers of artificial-intelligence infrastructure that have carried market indexes higher. Meanwhile longtime holdings like Fannie Mae and Universal Music Group subtracted from his performance.
Ackman told analysts that he is unhappy with the "frankly absurd" way in which shares in PSUS are trading. Most closed-end funds trade at a discount to the value of their underlying positions, but PSUS is an outlier. Its 22% discount was one of the widest of any U.S. closed-end fund that invested in public securities, according to the fund's semiannual report.
Ackman made his name as an activist investor, but for the past several years has focused on taking friendly, concentrated stakes that he holds for long periods. He seized on this year's market turbulence -- and the billions of dollars of proceeds he raised in PSUS's initial public offering -- to take new positions in six companies in recent months, he and Chief Investment Officer Ryan Israel revealed in a letter to Pershing Square shareholders Wednesday afternoon.
They include stakes in card networks Visa and Mastercard; financial-services providers S&P Global and Intercontinental Exchange and eye-care company Alcon. He also jumped back into Netflix, which he had placed a big bet on in 2022 only to walk away months later after it reported a loss in subscribers and a plan to introduce advertising.
Since then, Netflix "has effectively won the streaming wars" and can "outspend rivals on content while spreading the cost across the industry's largest user base," Ackman and Israel said in the letter. The market value of PSUS's Netflix stake was $225 million as of June 30.
The new positions came on top of big-ticket bets on Meta Platforms and Microsoft earlier this year. Ackman also sold PSH's stakes in Universal Music and Alphabet in the first half of the year and exited its position in Hertz in July.
Pershing Square now manages around $22 billion in fee-paying assets.
Ackman said an active marketing program for PSUS would begin shortly with the goal of generating demand for the fund, especially among financial advisers, and narrowing the discount. Ackman told shareholders they could help by spreading the word. He also said he plans to launch a fund focused on venture investments.
Ackman acknowledged mistakes in how the PSUS IPO was handled. Much of the offering was allocated to individual investors who may have received more stock than expected and ended up selling it.
"It was an ideal environment to take PSUS public in terms of the ability to deploy capital in a volatile market," Ackman said on Thursday's analyst call, "not the ideal environment to launch something new that no one's ever heard of before."