Bill Ackman Says Pershing Square Has Achieved a 20% Gross Annual Return Since Inception and Aims to Keep Beating That Bar. Can His Newly Launched Funds Live Up to the Track Record?

Hedge fund manager Bill Ackman's firm, Pershing Square, went public on U.S. markets with its Pershing Square USA (NYSE: PSUS) fund, backed by his big-name notoriety and a strong track record of success.

Ackman, one of the world's most famous investors, has run the Pershing Square hedge fund since Jan. 1, 2004, when he formed Pershing Square Capital Management.

The fund launched with $54 million in assets, and now the core strategy has about $24 billion in assets across different funds. Since its inception, the hedge fund has averaged a 15.6% compound annual return, beating the S&P 500's 11%.

On a gross return basis, before fees, the fund has averaged an annual return of 20% since inception, Ackman wrote in an Aug. 12 letter to shareholders.

This is a pivotal time for Pershing Square. It recently went public with its new Pershing Square USA closed-end fund, which tracks its core strategy, and later this year, it is rolling out a new fund, Pershing Square Ventures. Will he be able to keep churning out market-beating returns?

Pershing Square Capital Management Founder Bill Ackman. Image source: Getty Images.

Down 21% since its IPO

Since PSUS hit the market, the road has been a bit bumpy. The IPO priced at $50 per share on April 29 and is currently trading at around $39 per share, down about 21% since then.

In contrast, the S&P 500 has gained 7% since April 29. But Ackman has a longer-term view.

"Our goal in selecting investments is to find businesses that meet our core principles, that have a high likelihood of sustaining significant rates of normalized EPS growth, and that are available at attractive prices. When we find businesses that meet these criteria, we often hold them for years, and sometimes, for more than a decade," Ackman wrote in the Pershing Square USA semi-annual report.

The fund, which employs the same core strategy as Pershing Square's flagship fund, is highly concentrated, with 12 stocks accounting for 86% of the portfolio's assets. The three largest holdings are Microsoft, Uber Technologies, and Meta Platforms. Brookfield Corp. is next, followed by Amazon and Restaurant Brands International.

He expects each holding to grow its earnings per share (EPS) by at least 15% annually for the next three to five years, with half of them growing EPS by 20% annually. Ackman added that all current holdings trade at discounted multiples, significantly below their intrinsic value.

"Our goal for the funds and companies we manage and invest in is to generate gross returns in excess of 20% per annum over the long-term," Ackman wrote in the shareholder letter.

New Pershing Square "ventures"

The company also plans to launch Pershing Square Ventures, a fund that will give public market investors access to pre-IPO, private market, high-growth companies. Further, it will be allowed to hold companies after they become public. Ackman said it will have "substantially" lower fees than most private venture and growth funds.

"We believe our public markets experience translates directly to venture and growth-stage investing," the shareholder letter states. "Our public equity research has given us deep familiarity with many of the investment themes, most recently AI, that drive the businesses of the private companies we evaluate."

More details on the fund will be released in the coming months. It is expected to debut by the end of 2026.

Dave Kovaleski has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Brookfield Corporation, Meta Platforms, and Microsoft. The Motley Fool recommends Restaurant Brands International and Uber Technologies. The Motley Fool has a disclosure policy.