Andrew Bary

Bill Ackman is off to a strong start in 2025 thanks to a winning investment in Fannie Mae, and now his success has attracted an imitator.

Tidal Trust has filed for an exchange-traded fund keyed off Ackman's investments, the Vista Shares Pershing Square Select ETF. Tidal Trust will also offer ETFs tied to investments by these other notables: Stan Druckenmiller, Michael Burry, and Warren Buffett.

Ackman's chief investment vehicle is the London-listed Pershing Square Holdings. The closed-end fund returned 12.8% through Tuesday based on its net asset value, against a 1% total return for the S&P 500 index. The fund, which also trades in the U.S. under the ticker PSHZF, was off 0.5% to $53.14 a share Friday.

Pershing Square Holdings has gotten a big boost from its investments in Fannie Mae and Federal Home Loan Mortgage, whose shares have surged this year on expectations the Trump administration will free them from federal conservatorship. Fannie Mae stock, at around $10.50, has tripled this year and is up almost tenfold from where it traded about a year ago.

Ackman said on a recent investor call available on the fund's website that his firm owns about 220 million shares of the two mortgage agencies, a stake now worth about $2 billion. Pershing Square is one of the largest holders of the two stocks.

It has been a busy 2025 for Ackman. He got approval for his Pershing Square holding company and Pershing Square Capital Management to buy $900 million of Howard Hughes stock and turn the real estate company into a diversified holding company -- what he has called a mini Berkshire Hathaway. He also has been active on X, where he has 1.7 million followers, with critiques of his alma mater Harvard University.

While Ackman has scored this year, Pershing Square Holdings trades at a steep 35% discount to its net asset value based on Tuesday's stock price, about two percentage points wider than the start of this year. The fund has persistently traded at a 20%-plus discount to net asset value in recent years.

The fund has about 180 million shares outstanding, giving it a market value of $9.5 billion and a net asset value of over $14 billion. Ackman owns more than 20% of Pershing Square Holdings.

Barron's has written that the fund offers an inexpensive way to get access to Ackman and what has been a market-beating record.

Pershing Square Holdings did trail the S&P 500 last year with a return of 10%, against about 25% for the index. But it is way ahead of the S&P 500 over the past five years with a return of 22% annualized (based on the stock price), versus 15% for the index.

Eric Boughton, a portfolio manager at Matisse Capital, whose Matisse Discounted Closed-End Strategy fund (MDCEX) holds Pershing Square Holdings, thinks Fannie Mae and Federal Home Loan Mortgage, known as Freddie Mac, account for most of the fund's outperformance this year relative to the index. He notes Pershing Square Holdings is cheaper than usual based on its discount to net asset value and could benefit from steps by Ackman to narrow the discount.

Other positive fund contributors for Pershing Square Holdings this year are Uber and Hertz Global Holdings, Boughton says.

Pershing Square Holdings holds about a dozen stocks and Ackman's approach is to buy high-quality shares that can compound earnings. The firm added Amazon and Uber this year while selling Canadian Pacific Kansas City and cutting its stake in Hilton Worldwide Holdings.

Pershing Square Holdings has been handicapped with investors for several reasons -- contributing to the wide discount.

Although Ackman is best known to U.S. investors, the fund trades in Europe -- and some U.S. brokerage firms won't let their U.S. retail clients buy it. The fund generates a PFIC tax form (passive foreign investment company) that is more like a K-1 than a 1099. Many investors don't want to deal with a FPIC form.

Another negative is the fund's fee structure is stiff at 1.5% annually plus 16% of gains subject to a high-water mark. Most U.S. closed end funds have an annual management fee of about one percentage point and no incentive fee.

That is outweighed by access to Pershing Square Holdings and its strong record over the past five years at a huge discount from net asset value.

The new ETF will have a lower fee but won't carry a discount -- and it will have to wait for Ackman to disclose portfolio changes before acting. Ackman has said the delay and other factors give investors in his fund an edge over imitators.

Write to Andrew Bary at andrew.bary@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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May 30, 2025 16:44 ET (20:44 GMT)

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