Special Guest Bill Ackman on Markets, AI and Concentrated Investing

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Risk warning: The views expressed are those of the trust manager and are not a recommendation to buy, sell, or hold any investment. The views do not necessarily reflect those of Hargreaves Lansdown. Nothing in this podcast is personal advice. You should seek advice if you are unsure what is right for you. Investments can rise and fall in value, so you could get back less than you invest. Past performance is not a guide to the future. This content is not a recommendation to buy, sell, or hold any investments or companies discussed. The Pershing Square Investment Trust can use derivatives and gearing, which increases the potential risk. The strategy is concentrated (not diversified), which implies higher risk. Individual stocks mentioned are not recommendations. Diversification is important, especially during volatile market conditions.

Full podcast episode transcript

MATT

The views expressed during this episode were those of the trust manager, and not a recommendation to buy, sell or hold any investment. Nor do they necessarily reflect the views of Hargreaves Lansdown.

ANNA

Hello and welcome to the Switch Your Money On podcast from Hargreaves Lansdown. I'm Anna Macdonald

MATT

And I'm Matt Britzman.

ANNA

Today, which is Thursday the 11th of June, Matt and I are joined by Bill Ackman, founder and CEO of Pershing Square Capital Management, one of the best-known active investors of the last couple of decades. Pershing Square runs a very focused strategy, typically around 8 to 12 high conviction investments, mainly in large U.S. companies. It's very deliberately not a diversified index like approach. In the UK, many investors will be familiar with the listed vehicle Pershing Square Holdings, a £7 billion market cap investment trust which gives access to that strategy.

MATT

Yep Anna, so one of the important features of the trust is this idea of permanent capital. And it's something that we're going to talk to Bill about in terms of why he likes that structure, but just for a bit of kind of background, unlike an open-ended fund where investors are redeeming day to day, that doesn't happen with a closed end investment trust. And typically, that can give a manager the ability to take a longer-term approach. Again, hopefully something that we'll get Bill to talk about. We're also going to talk to Bill about markets more broadly. We're going to cover AI, there will likely be some chatter on SpaceX, OpenAI, Anthropic, some of the big IPOs that we're seeing. So, I think it's going to be a good one.

ANNA

Good morning, Bill and welcome to our podcast. I'm Anna Macdonald Investment Strategy Director.

Matt

And I'm Matt Britzman Senior Equity Analyst. Hi, Bill. Thanks for joining us.

BILL

Of course.

ANNA

Before we get into the individual stocks, can we start on why having a closed end vehicle is so important to you?

BILL

Well, look, the markets have become increasingly short term. More and more capital is controlled by what some people call pod shops. Firms where capital is deployed among a large number of small teams, where the teams are compensated based on relatively short-term performance and where they're very tight, what they call risk limits. Meaning if there's any degree of downside volatility, they're sort of forced out of names. The market's also characterized by index funds that are owning an increasing percentage of companies. And that money, takes the capital out of the float, which means the marginal buyer and seller has bigger influence. The results of that is a lot more volatility. And in that kind of environment, you can go through periods of time where very high-quality businesses, are trading at very deeply discounted prices. But if your capital is short term, effectively those investors have short term capital. They're forced to sell when things are even slightly worse than anticipated. And that creates an opportunity as long as your capital base can sustain, that short term volatility. And that's what gives us the advantage. And that's why we've really gone to a model where nearly 100% of our capital is in these sort of permanent, structures. So, it enables us to be a long-term investor. And if you think about, what is a company? A company, if you pick a good one, it's an infinite life entity. And the value of that business is the present value; the cash you can generate from it. To own that business for a month or two, you're going to miss out on significant opportunities.

ANNA

Okay.

BILL

You’re forced to own a business for such a short period of time.

ANNA

So does that mean that you are, in terms of, you have a concentrated portfolio that you are sitting and thinking, right, if the market moves, you know, for example, if there's a sell off, we are ready to go with a couple of ideas in the in the stable that we can bring them out and bring them on to the field. Is that how you think about it?

BILL

Yeah, we call it a library as opposed to a stable. We've built a library of very high-quality companies that we'd love to own. And actually, we're going through a period right now where those kind of businesses are available at very attractive prices, the kind of companies we like.

ANNA

Okay. So do you think over the last five years, for example, that the way that the market's behaved with an increase in passive funds and, and more and more high frequency trading that that is somehow providing these opportunities for you. But at some stage, do you think that balance shifts or do you think this is going to be a feature going forwards? At what point does this active management style really come back into delivering index beating performance? If this is what we're going to measure ourselves against.

BILL

I think it's not possible for the substantial majority of active managers to beat the market, but it is possible for a minority of them to. I don't know if it's a trend based, thing, but I do think the opportunity set becomes greater as long as your clients don't leave. Our performance is going to be different from the market because we're highly concentrated. What that's meant over the last 22 years is actually massive outperformance. You know, approaching 6 or 700 basis points per annum of outperformance. But we go through periods where we dramatically outperform the index. You know, just even the last few months is a period like that. S&P is up something like 7 or 8% for the year.

ANNA

I think it's about… I looked this morning. I think it's about six and a half. And you're like, you know you're a negative territory.

BILL

And imagine a world in which all your clients pulled your money at precisely the time that you should be deploying it. We're deploying capital in a very attractively priced market. The market's excited about, I would say, the shiny new thing, with sort of semiconductors, you know, the whole sort of AI infrastructure play. And then, you know, perhaps SpaceX. I think a lot of money is coming out of the market. Actually I heard an interesting anecdote, which I think is it's like the true, you know, the SpaceX IPO, which happens I think basically today, I think the stock starts trading?

ANNA

I think it's tomorrow. I think, it's closed today. I think it starts tomorrow.

BILL

Imagine you're an endowment that has an investment in SpaceX, which now is going to go from your private portfolio to your public portfolio. And because of its tremendous success, it's going to give you overweight, if you will, your allocation to public. You're forced to sell to bring things sort of back into line.

ANNA

Yeah. That's yeah that's interesting. And actually, when we think about it from an index point of view the S&P, it's quite interesting that they decided that they wouldn't fast track SpaceX or other mega IPOs. They won't be fast tracking them if they've still got that very low free float, that very low free float will lead to probably some quite dramatic share price movements in the other direction.

BILL

And I give credit to S&P, you know I think of Nasdaq caved to the marketing opportunity, winning the business from New York Stock Exchange. I think S&P is thinking kind of longer term.

ANNA

Yeah. No, I was I was quite pleased to hear about that. So, investors should be thinking about it as this is a very concentrated vehicle that knows what it wants to achieve over the longer term. But perhaps benchmarking it to something like an index is not the right way to think about it?

BILL

No, I think benchmarking it to an index is the right way to think about it. But I think the time horizon with which you should do the comparison is several years as opposed to several months.

MATT

Bill, you mentioned that this idea that you run this concentrated portfolio, can you just touch on how you came to the idea of having, you know, 8 to 12 stocks in the portfolio and why you prefer that concentration?

BILL

Sure. So, actually, many people in our industry say to us, Bill, you know, I would manage money exactly the way you do for myself, but my clients don't let me. And the benefit of concentration, I think, is pretty obvious, which is that you can select among your group of interesting ideas to own only the best one. Why own more of idea 20 when you can own more of idea 1, 2 or 3? And the reason why people operate in a less concentrated fashion, you know, diversification will give you a smoother outcome. The way to get fired in asset management is to have performance that's adverse to others, and you're guaranteed to have differentiated performance, i.e., occasional periods where you underperform others. And if your money can disappear overnight, then it's a much more prudent strategy to not, to hug the index before about how much capital is passively managed according to the index. That's the, you know, contractually, passively managed capital. You know, the money actually in index funds. But the vast majority of other investors hug the index, and only on the margin do they deploy capital, because, you know, if the stock market is down and you're down, you're less likely to be fired, right? If the stock market's up and you're underperforming, then people generally take the money elsewhere unless your method of doing so is selling us, an interest in a closed end fund. As opposed to the underlying forcing you to sell the underlying companies.

MATT

Yeah. Bill, let's shift a little bit. You have a reputation historically of being an activist investor. Right. Looking for companies where you can potentially instil change. Has your strategy on that shifted over time? You know, are you now more looking for companies where you don't have to go and force the board to try and sell half the company, or write open letters to investors, etc.? I know you were on the Liquidity at All-In recently. You talked about a company way back in the day. You took a 10% stake and couldn't get the CEO to call you back. Have you shifted that mindset now to less fighting and more kind of finding the businesses where you don't have to take the activist approach?

BILL

We were always looking for businesses where we didn't have to take on and do less work and get a successful outcome. You know, obviously we'd love to have the greatest durable growth companies, which are, managements already doing all the right things. So, it's always been our preference. It's generally hard or it has been historically hard to find a very high-quality business run extremely well, trading at a very attractive valuation. However, what I would say is, you know, as I spoke before, the introduced short term volatility markets has made that a much more common occurrence. So, we can build a portfolio, you know, I would say more recently of very high-quality businesses where our go forward estimate of return is something in the mid to high 20s. You know, you can do that today. And basically, these businesses are already operating correctly. So, you always choose that first. The second one I make is, you know, we entered this business 20 odd years ago, we did not have a track record or a reputation. We had not had a successful activist investment. After you've done it for 20 years, people know who we are. And their response to us activism is only needed if you can't get into the boardroom. Or at least they don't respect what you have to say. And that's really changed. And so, the result today is we still make investments in companies, which there are opportunities for the businesses to be improved, but we can have those conversations behind closed doors as opposed to, you know, hosting people at a conference, you know, hotel ballroom.

ANNA

Yeah. I mean, certainly I've noticed since I started investing, that you do get unusually because of the aspects that you mentioned about pension funds and about high frequency trading. You can actually get these incredible moves in what were very large companies that just wouldn't have happened. You wouldn't have had that magnitude of the move before. So, you do have, as you say, there's options to get in, you know, and to see pretty quick price appreciation or price depreciation in holdings. I was wondering about what you said about these companies already very well managed, and I'm interested, given that you're a prolific tweeter, we you know, we hear about your views. Do you think the companies that you're investing, I mean, some of these big companies, do you think they've had to become more political in themselves? I mean, do you think they have to deal with what we see in the US or in other countries, but particularly in the US, to get ahead?

BILL

Well, I would say we have a more, interventionist president, in the capital markets. You know, you've seen President Trump, you know, the Biden, for example, if you look at the Intel case, you know, in order to kind of help the US competitive position made a grant to the Intel Corporation to help. It was kind of a struggling, you think of it as a chip maker. And Trump's response was, well, I want ownership in exchange for that taxpayer, investment. So, you know, you don't want to get adverse to the president, these days. And so, I think corporate America is definitely paying attention to politics from that perspective.

ANNA

Yeah. Are you surprised by what's going on at the moment? It's hard to know what Trump expected when he went in into Iran. Do you think that there's going to be much change ahead of the midterms and how he's going to respond to affordability? That was meant to be the big watchword of this year.

BILL

Look, I think it's a credit to the president that he did something that I think will have a generationally positive impact at the cost of, you know, short term political risk. He knew going into Iran that the impact would be higher oil prices and higher gasoline prices. It's the one thing that you can very clearly see. You know, when you fill up the tank every few days and the price, you know, moves 20, 30%, that's something that hits the pocketbook of the consumer. And politically, it's always something that people respond to. However, a bigger risk to the United States than the short-term energy prices is a nuclear Iran. So, I think he made the long-term political decision with the short-term political consequences. I give him credit for that. I think we’re more in the endgame with respect to the Iran war. I think it will be resolved before the midterms. I think, you know, you could see a big reversion, obviously, in energy prices, shipping rates, all this stuff.

ANNA

Yeah, it can come back quite quickly. I mean, some people say that we're going to be at some kind of tipping point soon where reserves have all been used up, but hopefully, yeah, it gets resolved before then. But I think you were more outspoken about the tariff policy, I think?

BILL

I've been supportive of the president when I think he's doing the right thing. And I've been, I would say cautious to concerned when I felt that, you know, I thought the tariff approach was very, very high risk the way it was initially implemented. I agreed with the president that, you know, over time, we've allowed other countries to, quote unquote, take advantage of the United States with unfair trade relationships, and the tariffs are a good way to resolve them. But the introduction of massive tariffs in a kind of overnight fashion, I initiated this 90 day pause idea, and the president kind of took it up.

ANNA

Interesting. I mean, do you have thoughts about what you think's going to happen if it were to swing back and the Democrats would win the next election, do you think they would keep that kind of more America First policy and want to keep tariffs in place?

BILL

while the Supreme Court is kind of had its view on tariffs. So, it’s hard of the president to use that as a tool without the support of the Congress. You know again our system is a little bit different from yours. The president still going to be president after midterm elections.

ANNA

Oh yeah. No, sorry I meant I meant in 2028.

BILL

That just seems like in this era, far, very far away.

MATT

Okay, Bill, let's switch to the markets. AI mean, more broadly, I want to get your take on this. So, it feels like every few months we have a kind of swing in the narrative with a bit of worried about AI. I know that in the US is very unpopular with consumers. Do you think that AI has an image problem in the US at the moment, to some extent potentially caused by companies like Anthropic who are coming out and saying that the models are too good, they have to be, you know, held back before they go out. And how do you think that's going to help or hinder the proliferation of AI through more than just the hyperscalers, but down to end consumers and enterprises?

BILL

Actually, I disagree with what you said. I think consumers have had an incredibly favourable reaction to AI in terms of they actually use the product, right? That the adoption of the AI and the original OpenAI rollout is the fastest adoption of any product in history, in terms of number of users in a relatively short period of time. And a lot of people are integrating AI into their daily life, whether they're using it for health checking issues, they've identified or they're using it to help them in their jobs. I think, yes, there's also a fear among people generally about job loss. And I would say more so than any other technology development, certainly in my lifetime. So, I think there's sort of this interesting balance and it will be disruptive to certain kinds of jobs. But I'm increasingly confident it's going to be a big boom economically to job growth generally. And as long as people adapt, I think it'll be very, very positive for job growth.

MATT

Where do you sit on the AI bubble/ No bubble debate? This is something that seems to come up quite often, at least in the news flow in the UK. I don't know about in the US. Are you happy with the amount of spending that's going on our infrastructure? Are you seeing the returns you want to see from the companies in your portfolio that are some of the biggest investors in this space? Kind of like help us think about how you kind of frame that in your mind.

BILL

So I think very differently, you know, Microsoft, Google, you know, Meta, for example, these are companies that are not risking their balance sheets, to, you know, enter into this massive period of capital expenditure, and they're doing so in response to enormous demand, and they're doing so in response to… The first person to superintelligence, obviously has an enormous competitive edge in the world. You don't want to lose that race. That race is what's driving competition. And this, you know, sort of massive spending. I would say it's too early to know precisely what the returns will be from that spending. We want real time data points. You look at the SpaceX prospectus or the recent announcements from SpaceX. You know, Elon, you know, well known for his manufacturing and hardware capability, right. Built out a data centre and then he's rented it on a short-term basis, apparently his choice, where the payback period is very, very short. So, I don't question the enormous amount of demand for compute driven by AI and the power of the tool, where I think there's going to be lots of money lost is not every private company that's AI adjacent is going to turn into the next Anthropic. And, you know, if you think about the sort of frontier AI models, OpenAI was the frontier. And, you know, Anthropic seems to have pulled ahead here, and, Gemini. It's a race. And I would say the vast majority of people won't need the best model in order to implement, you know, the vast majority of things that they do. I worry more about the LLM business model than I do about the people building the infrastructure.

ANNA

Yeah. I mean, I think that what we're seeing at the moment is there are tensions now around the pricing that about how much it costs to run, you know, for example, for Uber to use LLMs. And I've read that quite a lot of Silicon Valley startups are now using China's models, which are, you know, considerably cheaper. So, I suppose there is that question about how if you don't need the very cutting edge and therefore question about the returns that you can get on that investment.

BILL

It was a bit like to me, if you make the comparison to the early days of internet, there was a company called Web Van, which was, you know, I would say like Amazon today, where you get everything delivered in relatively short period, food delivered in a relatively short period time. But the consumer subsidy was massive because they didn't have an economic model that worked, and that could only run as long as they could raise capital. You know, the early OpenAI adoption was driven by the ‘all you can eat’ pricing and moving to a per token-based pricing, particularly for, you know, the enterprise customer. And as that's happened and the tools become really powerful, you know, you have seen, you know, departments use up their budgets and if it wasn't a budget burn through massive amounts of money in a short period time. So, I think gonna be a lot more price sensitivity on the part of corporate customers. And to your point, as I said before, you don't need to be running the Mythos, Anthropic model, when you're looking for the best restaurant to eat in.

ANNA

Exactly.

BILL

And at this point, there have been really no differentiation. You know, you just click on the most powerful model to do stuff. And I think the free models are, in many use cases, good enough.

ANNA

Yeah. I see what you say, that, until now they haven't been sort of very indebted. These companies, they've been generating a lot of cash flow, which they've put towards, this investment that they're doing. But it does feel it that now is changing. You know, you've got Alphabet, for example, announcing a big equity raise. We can see now about 10-12%, in investment grade and high yield is now sort of tech AI related. So how tolerant are you going to be for continued rounds of equity or debt raising by these companies?

BILL

If you look at, you know, the Alphabet example or the other sort of big companies, you know, these are historically debt free enterprises, a lot of cash on the balance sheet. And if anything, they've been buying back stock over time, returning capital to shareholders because they didn't have an adequate use for that excess capital. And that's in the last six months, certainly reverted where a lot of those buyback programs have stopped. And they're actually, you know, very good use for capital, you know, Amazon and others spending whatever, $150 billion or more on capital investment. But it's capital, I think, very differently about a, you know, if you have a business, I don't know, a retailer that needs to upgrade all of its stores in order to be competitive, and therefore they have to spend a huge amount on CapEx versus previously. I think of that as maintenance CapEx, and it's a diminishing in the value of the company. This is not maintenance CapEx spending. This is, investment into, for example, building the Azure cloud out to meet the demand, buying servers, real estate, whatever is needed in order to be able to deliver compute that the market's prepared to pay a price that enables them to earn a return well in excess of, vastly in excess of their cost of capital. Warren Buffett always said the best business in the world is one that generates high returns on capital, and you can reinvest that capital at high rates on new projects. These are clearly examples of that.

MATT

What do you think it's going to take for the market narrative to shift towards this idea that actually having somewhere to put your capital is a positive. And Meta is probably a perfect example of this, where it tends to get punished in the market every time it comes out with a new CapEx raise. If they were to come out next quarter and cut CapEx are probably be rewarded for the market. But from your kind of logic, that's the wrong way to think about it. When do you think is going to be the inflection point where the markets catch up with that way of thinking?

BILL

When revenues and earnings growth reflect the high returns that are being earning on the capital spend, people are going to feel pretty good about it. And if all of a sudden, every company in the world is borrowing a ton of money and issuing a ton of equity in order to grow, that's not going to be a good narrative on a sustained basis, but I don't think we're going to get there. I could be wrong. I was surprised that Alphabet issued 80 billion of stock. They didn't really need to, but I think the way they thought about it. Look, we were a big shareholder of Alphabet. It was a very successful investment for us. I think we made something approaching three and a half, four times our investment over 3- or 4-year period of time. But we exited in this quarter, and we did so not because we don't think Alphabet's a great business, but it got to a valuation 31, 32 times earnings where we felt that capital could be better deployed. And, we bought a big stake in Microsoft. I think Alphabet looked at their share price and their valuation. And I said, look, there's a decent place for us to be issuing.

ANNA

Yeah, particularly if you're facing a wall of new money coming to the market, you might as well get in there quicker and sooner rather than later.

BILL

Now, competitively, while all your competitors are having to raise, you know, you have Anthropic and others coming public, why not take away some of the froth in public markets by issuing more stock. So, you can make life a little harder on your competition. It’s pretty shocking to me to see the Googles the world reduce their token prices, which is going to make life really hard for OpenAI and Anthropic. They can do so because, you know, if you think about the competitive landscape, you've got Anthropic, and in particular OpenAI, up until very recently for Anthropic, apparently. But they've been burning huge amounts of cash. That's a risky business model reliant on the capital markets giving you capital. This is why these companies are now going public. If I were Alphabet and I wanted to, you know, with their balance sheet, advantage, you know, they could reduce token pricing significantly and really disrupt and make it much more challenging for the competition.

ANNA

I would say it's probably be even more challenging for OpenAI than Anthropic, who seem to be much more going towards the enterprise side and trying to grow there, which I think has helped them sort of overtake where OpenAI has got to, and Gemini has actually been very successful for Google, hasn't it, in terms of defending their market position. On Microsoft, we had that sort of software sell down at the beginning of this year. How do you feel? Do you think that's been overdone in terms of people's fears about software, or do you think AI will actually help the dissemination of software and you will want to use Microsoft rather than making your own version of Excel or whatever?

BILL

Yeah, I think it's a company-by-company analysis. I think some software companies that have made sort of windfall profits, charging a lot to each user in a world where the companies themselves are highly incentivized to replace an expensive 10, 20, 30,000 per annum or more, software product with something they can develop internally. You know, the typical Microsoft 365 enterprise user, they're paying $20 a seat. That's for a, a basket of products that if you were to buy them, buy Zoom, buy Gmail, you know, etc., you have to pay 50 bucks or more. They've got, I think, something approaching half a billion users. And I think Microsoft's been, you know, very smart about Copilot. I think Microsoft becomes a bit like Uber, the platform by which people access AI in the workplace. And the last thing a CIO wants to do now is create his own version of Word or Excel or Zoom or and these other products. That's before you think through the cybersecurity, implications. A lot gets brought to the table with the Microsoft platform at a very small per user cost. And then that becomes the base for which they charge incremental dollars. You know, one of the really important roles of Microsoft, I think, is going to play for the enterprise is you want technology that can point you to the lowest cost model that you need to accomplish the objective. You don't have to be at, you know, the cutting-edge building on a spreadsheet. And so, Microsoft becomes the gateway to AI in the enterprise, and they do it in a manner that, you know, the CIO feels quite comfortable. I think it's a company-by-company analysis.

BILL

Bill what do you see in this kind of language model commoditization across the board. And that being broadly positive for your portfolio companies because you can, as you say, offer different versions of different models across the board. There will be some differentiation but, there's going to be cheaper options, and it's that idea of bundling the user, you know, at the moment you can kind of pick which model you want to use at different times. But, you know, broadly speaking, I think the most people don't want to do that. They kind of just want to be able to use the auto switch and switch through to the lowest cost to do their task. Is that a net benefit for the software companies that you think are going to be AI winners?

BILL

I think it depends on the business model. Again, if you're a high-cost kind of niche type software product, I think you're a much greater risk than if you're a company approaching a half a billion users at a very low cost. That's built into the enterprise. I mean, again, it's a company-by-company analysis, but I do think the Microsoft’s of the world are going to be winners.

ANNA

Okay, great. So, if we shift a little, you talked a bit about Berkshire Hathaway can we really start with the basics on Howard Hughes because this is a bit of a strategic shift that our retail investors might not fully understand yet. And so can you talk about the motivations between buying the stake in Howard Hughes and then touch on Vantage. And just tell us more about that and the approach, and what you're hoping to build here?

BILL

Sure. So, Howard Hughes, if you look at our portfolio, it's not a fit in the sense that the vast majority of the companies we own are large cap, mega cap, very high quality, durable companies that earn very high returns on capital. That's the business model as opposed to, you know, small cap real estate companies trading at big discounts to net asset value. The reason for the existence of this stake is one of history, which is, you know, it's now been, almost, I guess 17 years, since we took a stake in Howard Hughes. Howard Hughes, as a result of the financial crisis, lost the ability to access real estate debt financing, not Howard Hughes, a company called General Growth. Excuse me. This was a company. We bought 25% of the equity in a, business that was stock was down 99.5% during the financial crisis due to the, you know, the kind of shut down in the capital markets. We led a bankruptcy restructuring plan, about 25% of the company, it turned into our most successful equity investment ever. But part of the bankruptcy restructuring plan was getting rid of assets inside of Howard Hughes the market didn't like. We put all those assets in this company now called Howard Hughes. And, for 15 years, we kind of sorted through those assets, went through a couple of management teams, but ultimately a core business that we really liked on a multi-decade basis, a business of owning basically small cities, not one that particularly in a shorter and shorter term Wall Street environment, is going to be appealing to people and a business that is quite complicated, that takes time to do due diligence. So, the management company, the GP, as some people call it, at Pershing Square, made an incremental investment in the company. So, we own a stake through Pershing Square Holdings with about 30% of Howard Hughes. And through our other funds, another 2% of the company. We bought 15% of the company, with the management company giving us 47% of the, of the company. And we're taking the business through a transformation. So, we're going from a pure play, real estate owner of these small cities to a diversified holding company led by, an investment company called Vantage. Vantage is a specialty insurer, reinsurer. We closed on this transaction actually last week. And the business plan is to take a page from what Mr. Buffett has done. You know, Mr. Buffett started with, a very challenged company in the textile industry as textiles were increasingly being manufactured in Asia and over time liquidated that core business invested in insurance in a bank, a candy company. And you know, everyone knows the story, but the vast majority of the value was created by the compounding, of, capital inside an insurer where Buffett took that the assets of the insurance company, which were almost entirely invested in bonds and, took 100% of the float generated by insurance invested in treasuries and took the surplus or the equity, invest in common stocks. And he was a good stock picker and that drove the value of Berkshire. We're doing something quite similar. So, with Vantage we're taking the float of the insurer investing in short term treasuries. We're taking effectively no risk. And the surplus we're investing in common stocks according to the Pershing Square strategy. If do a good job, and the management team does a good job taking on prudent risks, and insurance will make a profit on the liability side of the balance sheet, and we'll earn a high return on the assets, investing it the way we expect. That will compound the equity of this company and hopefully a high rate over a longer time. So, it's a, you know, one of the things that Buffett did so important is earned high returns in his assurance operation. And he issued no stock or very little stock over time. And so, the per share value the company was able to compound over 60 years at 20%. And that's, you know, one of the great investment stories of all time.

ANNA

Why don't you think other insurance companies, even themselves, would think to sort of be more adventurous with their equity?

BILL

Because the best investors don't choose to take jobs in insurance companies. If you're a super talented investor, you're going to go work for a hedge fund, or you're going to go work for a more traditional, long only asset manager, you're not going to sign up to go work for an insurance company, just the pay scales that are offered. At Harvard Business School no one's really talking about going to work for an insurance company. It's something that's not thought of as sexy. Guess is the best way to describe it. What Buffett brought to the table is that he was a great investor that owned an insurance company, and he could manage that portfolio for free, as opposed to putting it out to a hedge fund. We're managing that Vantage portfolio for free, and Vantage will have the advantage of Pershing Square as investment acumen at no cost. And that's what gives it a competitive advantage. And therefore, we don't need to recruit people to Vantage to manage the portfolio. We're doing it on a third-party basis. We own so much of the company, it's in our economic interest to make Vantage highly successful

MATT

Awesome Bill, we are out of time. So, thank you very much for joining us today. That was great. Insightful. Thank you Bill.

ANNA

Thank you. That's been wonderful. So, thank you for the opportunity.

BILL

Have a great day.

ANNA

Thank you. That's all for this week. This session was recorded on June the 11th, 2026. And all information was correct at the time of recording. Next week, Helen Morrissey and Clare Stinton will be back.

MATT

Nothing in this podcast is personal advice and you should seek advice if you aren't sure what's right for you.

ANNA

Investments rise and fall in value so you could get back less than you invest. And past performance is not a guide to the future.

MATT

This isn't a recommendation to buy, sell, or hold any of the investments or companies we've discussed. And for the record, I have personal holdings in Microsoft and Meta.

ANNA

The Pershing Square Investment Trust can use derivatives and can use gearing, and this does increase the potential risk of the holding. The individual stocks mentioned aren't recommendations, and it's worth remembering that diversification is always your portfolio's friend, particularly when the markets are volatile.

ANNA

Finally, thank you very much to our producer, Elizabeth Hotson.

MATT

And thank you very much for everyone watching listening.

ANNA

That was Bill Ackman, Matt Britzman and me, Anna Macdonald. Goodbye.

MATT

Goodbye.