Pershing Square’s Bill Ackman is launching a US-listed closed-end fund after scrapping plans to move his London-listed investment company to the States. 

Ackman told investors at the annual general meeting of Pershing Square Holdings (PSH ) that the new fund, Pershing Square USA (PSUS), would not charge a performance fee but, like PSH, but would offer a concentrated portfolio of high conviction, quality growth US stocks.

A registration statement for the fund’s initial public offer has been filed with the US Securities and Exchange Commission.

At the presentation – which was closed to media – Ackman indicated that he hopes to raise about $10bn (£8bn) for the USA fund, making it his group’s second-biggest fund after the $14.6bn UK-based PSH.

Ackman had previously floated the idea of moving PSH’s primary listing to the US through a merger with an existing company. This would have brought it closer to its core investors and removed restrictions on marketing the fund in the US.

However, limitations and restrictions of the 1940 Investment Company Act in the US and issues with the relative size of the target company and questions over the share price had provided too many obstacles.

‘Ultimately, we decided a US listing was not viable,’ Ackman was preparing to tell investors.

While Pershing Square’s move to the US would inevitably have been cited as another example of a corporate exodus from the London market, it could have been the catalyst for a much-needed re-rating in its shares. 

Despite the fund’s impressive performance, generating a 240.6% five-year shareholder return, and the repurchase of more than a quarter of its shares since 2017, the stock stubbornly trades on a 28% discount to asset value.

That apparent disconnect is most likely caused by PSH’s high charges. The investment company pays 16% of its underlying investment return to Ackman’s Pershing Square Capital Management, on top of a 1.5% annual charge. 

That has at times lifted its annual ongoing charges to levels that many wealth managers, who are the main buyers of UK investment companies, find difficult to justify to clients, even though its sparkling returns have been net of fees.

Controversial fee disclosure rules, which make closed-end funds appear more expensive than open-ended funds, have exacerbated the problem.

Unlike the FTSE 100-listed PSH, the new USA fund will have no additional performance fee on top of its annual management charge. That could make it more attractive to international investors operating across borders. 

In an amendment to the PSH management agreement approved today, Ackman offered a sweetener to UK investors concerned his attention will be distracted by the new fund. 

The PSH performance fee will be reduced by 20% of the 2% management fee Ackman’s firm earns on the new fund. If the USA fund had $10bn, that would generate a $40m fee reduction for PSH shareholders, he said.

The annual meeting heard that PSH achieved a 26.7% dollar return on net assets last year,  just ahead of the S&P 500’s 26.3%. That narrow outperformance is remarkable given the fund holds only Google-owner Alphabet as one of the Magnificent Seven tech majors that drove the bulk of the benchmark’s returns. 

Instead, the other big winners for Ackman were restaurant chain Chipotle Mexican Grill, Universal Music Group and Hilton Worldwide hotel group. The hedges and interest rate swaptions that made the fund a pandemic winner in 2020 and 2021 weighed on the portfolio, however, knocking 1.5% off returns.