You Can Now Invest With Bill Ackman. But Here's an Even Better Option.

Bill Ackman's Pershing Square (NYSE: PS) made its U.S. market debut with the IPO of a new closed-end fund, Pershing Square USA (NYSE: PSUS). The hedge fund manager successfully raised $5 billion for the new fund, offering shares in the management company as an incentive for IPO subscribers.

Ackman's firm also manages another closed-end fund, Pershing Square Holdings (LSE: PSH), which is traded in Europe, as well as Howard Hughes Holdings. But the new listing is the most straightforward path for Americans to invest directly in the same stocks as Bill Ackman.

There's good reason to be interested. Ackman's investments have produced annualized returns of 16.2% since he founded his limited partnership in 2004. But there's an even better option for most investors than buying into the new U.S.-listed fund.

Image source: Getty Images.

Track Ackman's investments yourself

While Ackman's investing style has changed over the years, he's settled into a relatively simple strategy that's served him and his investors extremely well. He aims to buy a concentrated portfolio of stocks trading well below their intrinsic values. He tends to hold those investments for relatively long periods, only selling when better opportunities arise (and he doesn't have enough capital to invest) or when his investment thesis deteriorates.

With a concentrated portfolio, Ackman has the opportunity to write about every stock the fund owns and discuss his reasons for investing in them in his bi-annual letters to shareholders. He discusses his positions extensively on earnings calls with investors. The fund is required to disclose its U.S.-listed holdings every quarter via Form 13F. And Ackman's active social media presence often keeps investors informed after Pershing Square establishes a major new position.

That is to say, it's relatively easy for investors who want to follow Ackman's trades to capture most of the returns of Pershing Square. Even if you don't get in at the same price as the hedge fund, you can still capture the bulk of gains in its portfolio since the funds tend to hold positions for a relatively long period.

What might Pershing Square USA buy?

Ackman intends to deploy the cash raised by the IPO within a matter of weeks. In all likelihood, Pershing Square USA's portfolio will look very similar to that of Pershing Square Holdings.

Ackman recently made large investments in both Amazon and Meta Platforms for the fund. Both stocks continue to trade at relatively attractive valuations as of this writing. The fund's largest holding, Brookfield Corp., is arguably still a good opportunity with shares trading around 18 times trailing distributable earnings and potential for 25% growth over the long run.

Investors will find out for certain what Ackman buys in the fund by mid-August, when it files its first 13F with the SEC. In all likelihood, however, investors will find out even sooner from Ackman himself.

The cost of convenience

To be sure, it's a lot of work to actively monitor Ackman's trades and adjust your own portfolio based on various filings and disclosures. Many investors would prefer the more convenient option of investing directly in Ackman's fund. But doing so comes at a significant cost.

First, there's the management fee. That's the fee charged by Pershing Square Capital Management to buy and sell stocks in the portfolio. Shareholders will pay 2% for that privilege. You could mitigate some of that fee by also owning shares in the management company, which IPOed as part of the dual listing with the closed-end fund.

The second cost is that Pershing Square USA will likely trade at a discount to its net asset value. For example, the European-listed fund trades at nearly a 30% discount to the value of its holdings. As a result, Pershing Square Holding's day one investors earned a compound return of just 14.9% versus the 16.2% average annual increase in net asset value through 2025. Pershing Square USA closed its first day of trading at an 18% discount.

Importantly, the discount to net asset value is constantly in flux, adding significant uncertainty for investors buying into the fund. That could work in investors' favor, but it could just as well work against them.

It's still possible that Ackman's new fund could outperform the market despite those headwinds. Indeed, the 14.9% return for shares of the European-listed fund handily beat the S&P 500. But many investors can do better by simply paying attention to Ackman's moves and copying his best ideas.

Adam Levy has positions in Amazon and Meta Platforms. The Motley Fool has positions in and recommends Amazon, Brookfield Corporation, Howard Hughes, and Meta Platforms. The Motley Fool has a disclosure policy.