Ackman Talks Howard Hughes Plans, IPOs and Anthropic

Author: Bloomberg Television · Watch on YouTube

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Original language: English

Original video: Ackman Talks Howard Hughes Plans, IPOs and Anthropic · Channel: Bloomberg Television · 16:54 · Watch on YouTube

Topics: Local and open-source models, Health and science

Summary

Bill Ackman says Pershing Square is using Berkshire Hathaway as a model: growing an insurance business, managing its assets, and avoiding dilution. He outlines plans to reduce Howard Hughes’ real estate equity commitment by bringing in outside partners and redeploying capital into Vantage. He also discusses the discount on Pershing Square USA, the narrow market for IPOs, and risks surrounding AI companies. The interview concludes with his daughter Lucy’s recovery and the brain institute he and his wife are building to advance research and patient care.

Key points

Ackman describes Vantage as a specialty insurer and reinsurer, with short-term Treasuries backing most assets and a substantial portion invested in common stocks.
He says Vantage will operate with relatively low leverage and aims to build a high-return-on-equity insurance business.
Howard Hughes plans to bring in third-party real estate investors, potentially reducing its equity commitment by as much as 80%.
Ackman hopes to free up $2 billion to $3 billion from Howard Hughes by the end of the following year for reinvestment, including in Vantage.
He says Pershing Square USA is fully invested and argues that its discount to asset value reflects, in part, a marketing issue.
Ackman says the market is narrowly focused on space-related businesses and Anthropic, while Pershing Square favors companies it believes can deliver over a five-year horizon.
He calls Anthropic an extraordinary business but says he is less inclined to invest in fast-growing companies that consume substantial capital and face uncertain competition.
Ackman is more concerned about harmful uses of open-source AI by rogue actors than about frontier AI companies themselves.
He says Lucy is recovering, relearning to walk and building confidence, and describes her care as an inspiration for a brain institute focused on delivering treatment as well as research.
Ackman expects major progress in understanding the brain as new devices make it possible to gather and interpret more brain data.

Chapters

Start	Chapter	Summary
00:00	Vantage and the Berkshire model	Ackman explains how he plans to use Vantage’s insurance operations and investment portfolio to grow value without issuing stock.
03:46	Howard Hughes’ real estate plans	He describes bringing in outside investors to reduce Howard Hughes’ equity commitment and free capital for other investments.
05:22	Pershing Square USA and IPOs	Ackman discusses the fund’s market discount, its investment strategy, and the market’s narrow focus on prospective IPOs.
09:01	Anthropic and AI risks	He assesses Anthropic’s business prospects, the challenges facing frontier models, and the risk of harmful uses of open-source AI.
12:09	Lucy’s recovery and brain research	Ackman shares an update on his daughter’s recovery and explains how the experience prompted a care-focused brain institute.
14:13	Personal purpose and the future of brain science	He reflects on balancing the IPOs with his daughter’s hospital stay and on the potential for new technologies to advance brain research.

Quotes

So our goal is to build a high ROE, uh, specialty insurance company led by a superb team — 02:09

We’re going to begin a process, uh, immediately, uh, to bring in partners to reduce our equity commitment to our real estate by as much as 80% — 04:50

So this is just a marketing issue. — 07:27

I’m actually less concerned about anthropic or OpenAI being the source of the problem. — 12:09

a significant life is having this one in which you had the largest impact on the largest number of people. — 15:15

Concepts and entities

Bill Ackman, Warren Buffett, Howard Hughes, Vantage, Pershing Square USA, Anthropic, OpenAI, Lucy Ackman, Neuralink, Precision Neuroscience, Berkshire Hathaway

Full transcript (original language)

00:00 So you just had your Howard Hughes investment. And again, the biggest acquisition you did for this was very recently closing this insurer vantage. And with that you get some more firepower behind you to invest. What is the plan with that money? What are you looking at? Sure. So if you if you follow Mr. Buffett over 60 years, incredible. 61 years, maybe incredible career. And you look at what how did he creates value Berkshire Hathaway over time. He did I would say two principal things. Let me move three. Um, first he has he wound down the

00:33 textile operation. He took the capital and bought an insurance company, and then he managed the assets of that insurance company differently from a typical insurer. He took the float and invested in short term treasuries. So the policyholders knew that there was money set aside to pay claims. And then he took the surplus with the insurer and invested in common stocks. And he did a good job managing that portfolio. And insurance is a very cash flow, generative business because you write premiums, you collect money upfront and you pay it out in the future. And as a result, uh, Berkshire was able to grow a very rapid rate, compounding, uh, the insurance company’s assets,

01:07 earning a high return on capital without having to issue stock. And so Berkshire had a million shares outstanding for most of its life. Uh, until, uh, I guess the Gen re acquisition. So the combination of growing a very valuable business inside a company and not issuing stock as you grow led to enormous pressure, sure value being created. Basically, we’re taking a page from Mr. Buffett. Vantage is a specialty insurer and reinsurer. Uh, we closed in June. Uh, in July, we announced that Mark Rennison, the former CEO of Arch Capital

01:38 Group, one of the best performing insurance companies over the last 25 years. Uh, he was the CEO for the last eight years. He was that arch really from inception. Uh, is became executive chair advantage. Uh, Mark recruited David Ginsburg, former president, his protege, uh, at Arch capital Group. Uh, Lucy Fato, former vice chair, general counsel of AIG. And we brought an enormous horsepower to what was already a very good insurance company platform, already had a very good team and were taking the. We immediately sold the fixed income assets, which has become increasingly

02:09 important because of moving rates. Yes, we invested the money in short term treasuries. Uh, but 65% or so, when 35% of the assets we invested in a common stock portfolio that we manage. So our goal is to build a high ROE, uh, specialty insurance company led by a superb team with us managing the assets and grow Howard Hughes and increase the intrinsic value of the company. Just on that note, on selling longer dated treasuries, which obviously add to your point, was a very prescient move concerning what rates are doing. Is this an environment where generally

02:40 you’d be avoiding duration, be it Howard Hughes or any of the other investments that you look at? I know equity majority investor, but is that bond market untouchable right now? So I’m not really a fixed income investor. I never found that risk reward of owning a longer term fixed income instrument. Interesting. Just not my I sort of like risk free or high return. I don’t like stuff on the equity portion then advantage. How far can you push this? How much can you invest into equities. So we’re going to run a relatively low leverage insurer. Most insurance companies you know, write a uh amount of premium equal to uh, the,

03:14 you know, the the equity, the capital of the insurer will write less than that. Um, and we’ll also most insurers invest, you know, something like two and a half times, uh, their equity in assets. And we’ll invest less than that. So we’ll have much less leverage on both sides. We’ll take zero risk for the bulk of the, uh, insurance company assets, as I mentioned, short term treasuries. That frees us up the flexibility under the capital rules to have something in order of 40 to 50% of the of the, uh, uh, if I’m approaching 40% of the asset, 40 or 45% of the assets in common stocks

03:46 and the vantage acquisition, any other transforms, transformational acquisitions you’re looking at or vantage has done, and you can set that aside for now. I would say it’s certainly not done. It’s at the very beginning. And Mark’s going to do his thing right. But we announced something else of significance today. I tweeted about it and we talked about it today, which is Howard Hughes, uh, has built an extraordinary team as an amazing collection of assets in markets where people want to live, and the business is selling lots to homebuilders and these small what we call NPCs, these small cities that we that we manage, we own all the commercial real estate, uh, the

04:18 land, uh, etc. it’s a business we financed entirely with our own equity for the last 15 years. Uh, we’re going to a model. We’re going to bring in third party investors, uh, you know, think Brookfield, you know, think Blackstone. Right. Uh, the typical real estate investor today puts up very little of their own money. They charge fees and promotes, uh, we’re going to have a lot of skin in the game today. We have 100% of the equity. We’re going to begin a process, uh, immediately, uh, to bring in partners to reduce our equity commitment to our real estate by as much as 80%, uh, and then

04:50 turn Howard Hughes into more of a asset real estate asset management business with a lot of skin in the game, but one that can earn a much higher return when you take out 80% of the equity, bring in third party capital you’re in promotes. That will enable us to take, we think, 2 or $3 billion of equity over the next, you know, sometime by the end of next year, hopefully capital that we can now redeploy into, uh, advantage. And, you know, when you get a very talented team, you want to put more capital behind them. And that’s what we’re doing with Mark. What the real estate subsidiary benefits

05:22 now can earn much higher returns because it’s leveraging third party capital that’s going to enable it to accelerate some of the development assets that, you know, in the context of the cost of public company capital were difficult to achieve, are difficult to justify, now become much more attractive. So while you’ve been working on this, you also launched your IPO both at Pershing Square and Pershing Square, USA. When it comes to the latter one, the closed and fund, you raise $5 billion and it’s since fallen 25%. It also trades at a discount of $0.25 to

05:52 every dollar, something that you or both of those are the same thing. Yes. For the the and you’re clarifying my clarification. So I’m pleased for that. But you’ve called this ridiculous. This, this, this discount that it’s trading at. Bill, what do you do to turn that around? Uh, or among other things, we go on Bloomberg TV and we talk about it. All right. This is the moment. So talk about it. What’s gone wrong? Okay, so we did an interesting IPO in that we did two lists. We did a listing and an IPO. We took public a closed and fun but a very different closed and fun. So typical closed and fun frankly doesn’t have a very good track record.

06:24 Uh, and uh, the it’s not really a financial it’s a financial product that’s sold generally to a financial advisor. The client is usually not particularly involved in this case. For the majority of the investors, the substantial majority, the investors, they made an investment, this entity to invest with Pershing Square historically to invest with Pershing Square as a U.S. citizen. Got to invest with us privately in a fund where we charge a 1.5% management fee and a 20% incentive fee, and you had to lock up your money for, you know, over a longer period of time. This is a liquid public vehicle that

06:56 doesn’t charge incentive fee. Yeah, it’s the lowest cost hedge fund of the world. It’s got a 19% compounded, you know, nearly 23 year, uh, track record. The track record of the strategy is the lower fee structure, the entity. So it’s a liquid, truly liquid alternative at the lowest fees. Now, what have we done? We focused since the IPO on deploying the capital. Our first priority was putting that money to work. We’re fully invested at Pershing Square, USA. What we haven’t done, what we just are beginning, and you’re part of that process, is letting people know this. And so this is just a marketing issue.

07:27 It’s a marketing issue. We need to let people know that Pershing Square USA is actually, if you want investment, Pershing square kind of I know people all the time. They say, Bill, I’d love to invest with you, but you know I can’t. Well, now you can buy, you pay, you can spend $39 if I can just slightly push back on that. Because in your most recent report for Pershing Square, USA, you did say that the asset value had fallen by more than 8%. Okay. So isn’t there something with the underlying stocks too, that maybe some of the performance is also waning? So I think any of is down about 3% from the IPO.

07:57 Okay. About 240 basis points of that is actually the cost of the IPO. So we’re basically flat in terms of. We deployed 5 billion of capital in stocks. We like that we think are very compelling on current values. And I wouldn’t want someone to judge us. In fact, the actually was very helpful to us as we were deploying capital stocks were going down. Right. In particularly the stocks we were buying, we were buying meta as it was going down. That’s, you know, obviously starting to head in our direction. But we owned a portfolio. Some of the best we call super durable growth companies in the world. Businesses like an S&P global, that you

08:30 couldn’t touch something less than 30 times earnings that were able to buy a 21 times earnings. You know, a business like the Intercontinental Exchange, an amazing business with an incredible track record. You could note at 24 times earnings today by the 17 times, you know, it’s a market that has become is a very narrow market. I’m sure you’ve you know, where the market’s attention is focused and the kind of businesses we like to own, we own, we own businesses based on how we expect them, the returns we generate over the next five years. Not five minutes. Not next 90 days. So.

09:01 And I can’t tell you where any stock we own is going to trade in the next. I mean, it is an incredibly concentrated market, and we’re waiting for more big IPOs that might make it, although it seems like they’re falling off a cliff. We’ll see. This is an interesting thing. What do you think about that? We still are expecting anthropic IPO. Uh, OpenAI delays or delays. Is something going on here, Bill? I don’t actually understand the aura delay, at least based on the public reports. I think it’s an interesting company. I didn’t read the prospectus. Um, but apparently they had an oversubscribed offering. Assuming assuming that’s true. I don’t know why they did. So they couldn’t get the valuation they

09:31 wanted. Is there something to this market that unless you’re anthropic, you can’t get the valuation you want? Again, the market is very narrowly focused, I think, on space and anthropic, uh, and on on the picks and shovels that support the space. Is that a problem? Especially if anthropic. I think we should all remind everyone. I think it was on the 22nd. You put out something basically saying, are we going to see an anthropic S-1? Oh, by the way, there’s a 10% chance we kill humanity. And that is exactly what we saw. There was a large ish part of that prospectus that basically said, here’s all the harm we might cause, but what do

10:04 you make of an IPO with that sort of thing in it? And is that a company you would even buy? So I think, uh, I don’t anthropic uh, it’s it’s perhaps the greatest business story I’ve ever seen in terms of, you know, from the de novo to 2 trillion. Uh, I would say as significantly just the revenue ramp of the company, the quality of the product, uh, you know, we, we use, uh, clawed internally. So it’s, uh, it’s clearly an amazing company, you know, query whether the frontier model companies will be able to maintain their market presence in light

10:35 of the power of and of of of, uh, open source and open weight models. I mean, you you wouldn’t buy it because you’re scared of that competition. You know, we look to buy businesses that we can predict what they’re going to look like over a very long period of time, you know, kind of boring things like, you know, perhaps Microsoft or S&P global or Visa or Mastercard, you know, things that, uh, are in our portfolio, um, we are less likely to be an investor in a very fast growing business that’s, you know, Lou’s consuming a huge amount of capital and you’re betting on kind of the lines crossing at some point in the

11:05 future. Do you think? I think, I think it’s super interesting. Businesses are recognizing the prospectus actually been filed. I’ve read. No, no, no, it’s just reports at this moment. So we have to wait with what the actual language sounds. But on the point. So, you know, interesting. Uh, I think Jensen’s made this point. Well, if you’re a $2 trillion company and you have a product or service, uh, that can cause enormous harm, um, you’re going to be very careful about releasing that product to the market. I feel like you don’t need, at least for the, you know, the anthropic, the world. You don’t need legislation or the government to protect them from doing

11:38 something stupid. You would hope you wouldn’t, because they’re, you know, it’s a bit like a farmer company. You don’t release a drug to the world. You know, maybe in the case of a drug you want, you have government oversight. But there’s huge disincentive to put out a product that’s going to destroy the world. Does that mean that you’re less concerned about all this? You know, I worst case scenario out there, you think they’re going to self-regulate. Okay, I’m actually less concerned about anthropic or OpenAI being the source of the problem. I’m probably maybe more concerned about a bad actor, a rogue actor who does not

12:09 have the same considerations, who, you know, uh, uses the resources of an open source model to cause enormous harm. And I think that’s still a very significant risk. So I’d rather that the. Oh, that the best labs, the best frontier labs are incredibly powerful so they can protect us apart from the rogue operator using a less powerful, uh, I feel I want to change tone here just for a moment, because you’ve been very public on the incredibly and incredibly difficult year that you’ve had. Um, you posted a long missive on X, which I would recommend and not a

12:42 missive along, I say, rather than to recommend anyone to read about your daughter Lucy, who suffered a brain hemorrhage, she was taken into the hospital. They had to do a significant operation on her that, in the wake of that, left her unable to speak, to walk. Um, it’s something that you’re now dedicating a lot of your time to. I think just the most important question. How is her recovery moving along? You know, I think she’s doing really, really well. Um, um, you know, it’s, uh, it’s a journey, uh, but, you know, from where she started, you know, where, uh, you

13:12 know, she’s she’s the same old Lucy. You know, she has the same friends. She’s got the same sense of humor. Um, she’s learning to walk again. She’s, you know, learning again. She’s learning confidence again. She’s an actor. She’s very good at saying no. Um, and, uh, you know, vision, even her vision. We did this kind of mitochondrial therapy first human patient. And she had zero ability to see light. And, you know, 22,001 of her eyes, which is not great. Um, and we don’t know entirely whether

13:43 it was the mitochondrial therapy, but we suspect it might have been helping her. Um, and, you know, we’re using her as kind of patient one, if you know what can be achieved if you put every resource, every technology, uh, and incredible therapy, incredible care, nutrition, you know, we have, you one of the fortunate things about our economic circumstances we can provide the care for, but we think it should be available to everyone, and so on. Kind of contemporaneous with Lucy’s recovery.

14:13 We’re we’re building an institute that is going to be not just another brain research institute that, you know, studies the brain, but a place that can be very focused on delivering care to patients. So I don’t think it would be lost on anyone who who follows your work that in the midst of this you were also in the middle of of of two IPO is just what was going through your mind at that moment. Uh, and the answer is I was it was it was a good distraction. Um, but, uh, I, I as I mentioned, I, uh,

14:45 very fortunate was able to rent the hospital room next to her. Uh, they remove the bed. You know, zoom. Right? IPOs are done by zoom today. Really? Very few in-person, uh, meetings. And, uh, that enabled, you know, kept me busy. And she was right there, and and, uh, you really can’t be with someone 24/7. So it actually was my my inspiration for getting the IPO done. Let’s her. You mentioned that, you know, through this experience, you and your wife have now started this institute. You’ve said before that you felt that you were designed to help her, that

15:15 everything in your life basically led you up to this moment. Do you think it’s changed at all? Just what you see doing with with the rest of your life, though? You know, look, my version of, uh, I always had this view that, uh, a significant life is having this one in which you had the largest impact on the largest number of people. Largest good impact. And so, in a way, this fits into that, uh, mandate. I think this initiative can have a hugely favorable impact on a very large number of people. I don’t I don’t know anyone who hasn’t had a parent or grandparent or a son or

15:49 daughter or friend who hasn’t had a major brain related issue, whether it’s Alzheimer’s, whether it’s, you know, they were during the military and they got hit with a ballistic, uh, you know, with a bullet or, um, or they, you know, riding a bicycle and they crash in Central Park. Uh, or psychiatric issues. You know, the brain is something that is while we’ve studied the brain, we don’t understand it. And what makes this moment unique in history is the anthropic base of the world are making it possible for us to. You know, the brain has generates an enormous amount of data. Now we’re developing devices.

16:20 Neuralink, precision neuroscience, other, um, you know, interesting synchrony, lots of different approaches to getting basically data from the brain and, uh, seeing examples of that data being converted into here’s what he’s actually trying to say. It’s going to be soon. Here’s, you know, Lucy, here’s how you can see again. Maybe you wear a pair of glasses that that with a camera that transmits data directly to the visual cortex. Um, we’re going to learn a ton about the brain in the next three years. Five years. And having a place which aggregates everyone interested in the topic with

16:54 the appropriate amount of resources. I think we’re make huge progress. It’s really important work. Um, and we’re so lucky to have you share some of that work that you’re doing with us.