Pershing Square USA (NYSE: PSUS) is a closed-end fund that allows retail investors to put their money alongside hedge fund manager Bill Ackman.
The fund currently trades at roughly a 20% discount to its net asset value, meaning investors can effectively buy $1 worth of Ackman-selected assets for just $0.80.
While that discount sounds immediately attractive, closed-end funds frequently trade below their NAV for extended periods, making the discount alone an insufficient reason to invest.
Comparisons to Berkshire Hathaway (NYSE: BRKA)(NYSE: BRKB) have followed Ackman’s public investment vehicles, but Pershing Square USA is structured very differently from Warren Buffett’s famous conglomerate.
Berkshire Hathaway is an operating company that owns and runs businesses across insurance, utilities, railroads, and home building, among a wide range of other sectors.
Pershing Square USA, by contrast, is a passthrough entity that holds a collection of stocks and bonds, functioning more like a mutual fund than an operating conglomerate.
Unlike mutual funds, which are bought and sold at NAV at the end of each trading day directly from the fund’s sponsor, closed-end funds issue a fixed number of shares through an initial public offering and then trade on exchanges based on supply and demand.
That structural difference means the market price and the underlying NAV of a closed-end fund can diverge significantly, as has happened with Pershing Square USA since its IPO.
Ackman is separately building a more direct Berkshire-style business through Howard Hughes Holdings (NYSE: HHH), an operating company that recently acquired an insurance business to replicate Buffett’s well-known investment formula.
Howard Hughes Holdings is still early in its journey, having only just established the structure it hopes to capitalize on over the long term, making it a work in progress by any measure.
Buffett himself has retired from Berkshire Hathaway, with Greg Abel, his hand-picked successor, now running the conglomerate, adding another layer of transition that investors in that company must consider.
For those who specifically want exposure to Ackman’s stock-picking ability, Pershing Square USA offers a deeply discounted entry point, but investors should understand they are buying a fund structure, not a Berkshire clone.
Anyone seeking Ackman’s attempt at replicating the Berkshire Hathaway model will need to look toward Howard Hughes Holdings rather than Pershing Square USA for that particular investment thesis.
