Why $PSUS deserves a premium to NAV and $PS deserves a premium multiple | Marlton's James Elbaor

Summary

• James Elbaor expects PSUS, the $5B Pershing Square closed-end fund, to be treated less like a conventional closed-end fund. He sees it becoming “much more like a holding company just in the wrapper of a 40 Act fund” — with quarterly earnings calls, heavier reporting and greater corporate access. His base case is for the roughly 17% discount to compress toward the 9% U.S. equity CEF peer average, with a stated belief that it belongs nearer Gabelli’s 4% discount (a $2B fund that has underperformed the S&P since inception, while Ackman has outperformed).
• On PS, the newly listed management company, Walker’s internal model is $550–590M of adjusted fee-related earnings against a $17B market cap (400M shares at ~$42.50) — roughly 30x FRE. His bridge uses $34.1B of fee-paying AUM: PSH $21.2B, PS LP $1B, PS International ~$0.5B, Howard Hughes $5.4B and PSUS ~$6B by year-end, at a ~1.8% run-rate FRE yield. It gives zero credit to the Financial Times-reported, unconfirmed Pershing Square Asymmetric launch.
• Elbaor argues 30x is cheap versus alt-manager comps at ~27x NTM (Apollo 30+, Ares high-20s) because the capital is genuinely permanent and the headcount is 50 versus Carlyle’s 2,200+. At roughly 20% annualized compounding, Pershing’s AUM could exceed $60B in three years, with the team remaining below 75 employees at $90B — “this is going to be like the Visa of asset managers.”
• The 50%-of-AUM valuation objection (a $17B manager on $34B of assets) is, in Elbaor’s view, the wrong lens — and alignment answers the incentive-fee critique. Bill and team own over 85% of PS; the first 5% of returns’ performance incentive flows to PS shareholders, with returns above that split roughly 50/50 with team compensation. The structure means “if shareholders do well, Bill just does a little bit better… if shareholders do poorly, Bill does just as poorly.”
• Capital allocation at PS: buybacks are probably off the table with only ~6% of shares floated (~2% freely tradable), so Marlton models an 80% dividend payout ratio with 20% retained for balance-sheet seeds such as SPARC and PSUS. He expects capital allocation to be “question number one” on the first earnings call.
• Growth pushback from Walker — everything in the complex trades at a discount and PSUS raised $5B against a $10B target — gets the Elon Musk treatment. A skeptic told Elbaor the launch would never happen; it became the largest closed-end fund launch in history. The “French” have reportedly been engaged on the Universal Music Group/SPARC angle, after SPARC’s quarterly legal fees rose from roughly $50–100K to over $1M, and Marlton says its inclination is to invest in a Pershing Square Asymmetric offering once it sees the terms.
• The closing valuation split is the tradeable takeaway: Elbaor says underwriting 15%+ annual compounding alone supports the current ~30x; Walker goes further, arguing even S&P-like returns underneath make PS “very interesting very quickly.” Walker’s confession: he bid 20x FRE at the IPO on slightly lower numbers, missed the fill, and the stock has since roughly doubled.

Deep dive

1. The largest closed-end fund ever launched — and the case for it not trading like one

• The setup: PSUS raised $5B — the largest U.S. equity closed-end fund, two times its closest peer, one of the six largest IPOs of the past decade and among the 20 largest in U.S. history. Elbaor’s framing: “this is not going to be treated like a closed-end fund product from an asset manager… this is going to be treated much more like a holding company just in the wrapper of a 40 Act fund,” with quarterly earnings calls and far greater corporate access to Bill and the team.
• Walker’s pushback — worth keeping: IAC, the Liberty complex and Cannae — every holding company trades at a discount, and this one is externally advised at a 2% management fee. “If you get what you wish for… would it really trade at a premium?”
• Elbaor treats discounts as multiples: “greater discount, cheaper; smaller discount, more expensive” — and premiums do happen, pointing to Robinhood’s new venture fund trading at a large premium. Marlton’s structural activism example: in the Logan Ridge/Mount Logan merger, shareholders received 110% of NAV versus typical NAV-for-NAV deals.
• The target: base case “significantly closer to a nine discount” (U.S. equity CEF peer average), and “I really believe that it should be much closer to a four discount” — where Gabelli’s $2B fund trades despite underperforming the S&P since inception. With PSUS yet to report holdings (weekly NAV shows $48.71) and a reporting cadence coming, “that discount is not going to be sitting at 17.”

2. PSH London versus PSUS: “free-base Bill” versus the 40 Act

• The two vehicles serve segmented investor bases: Texas Teachers filed a disclosure regarding PSUS but couldn’t invest in London under its mandate, while London serves a European-centric base. Elbaor’s memorable split: “if you want like free base bill, like you want like pure Bill and team,” London has more of that — a longer track record and more flexibility for esoteric investments — but it carries a performance incentive.
• Walker’s 40 Act question cuts at the hedge-book pitch: the COVID hedge made roughly 100x, the 2020–22 inflation trade roughly 10x and the GFC hedges were a roughly 20-bagger — can PSUS replicate that inside a 40 Act fund? Elbaor says traditional closed-end funds do not conduct that type of activity, “but I fully anticipate that there will be a creative way.”
• The same answer applies to absorbing a private company into PSUS: “for the Pershing Square team, where there is a will, there is a way… Do I think it’s likely? I think it’s unlikely, but I would never say never.”

3. The track-record debate: scoreboard world versus the lottery-ticket monkey

• On the “take out the COVID hedges and the record looks ordinary” critique, Walker is of two minds but lands hard: “we live in a scoreboard world,” Ackman “called his shot,” and “we live in a slugging percentage world” — you can’t strip out the 100-bagger.
• Elbaor calls the argument “a little silly”: then you’d have to take out General Growth too — “somebody’s history is somebody’s history in their entirety.”
• Walker’s self-aware counterweight, told as a story: a contact in late 2020 pitched GameStop on a thesis that was “comically wrong” — yet the squeeze would have produced a legendary track record. “You kind of were literally the monkey that landed on a lottery ticket” — a hypothetical he keeps in his head even while agreeing on Ackman.

4. Today’s preference: PSUS over London — and where the alpha comes from

• Marlton is in PSUS, not currently PSH London, though London holders have catalysts: a 30%+ discount that’s historically wide versus 25%, and a fee rebate that grows as PSUS and other assets scale. The structural problem is cultural: London allocators “do not really see or understand Bill in the way that American investors… see and understand Bill.”
• Walker’s alpha challenge: with Google, Amazon and Meta among the positions — all three among the largest S&P companies — why pay 2% versus a near-free ETF? Elbaor’s answer: great businesses trading at multiples below the S&P, plus smaller securities with “significant embedded upside” — SPARC forward-purchase agreements and Level 2/Level 3 securities that may be valued at cost or otherwise undervalued. Over time, PSUS could become “much more of a sum-of-the-parts story” where NAV may understate embedded growth, on top of an anticipated distribution rate. He also expects PSUS to run slightly levered.

5. PS the manager: the model behind ~$17B and 30x FRE

• The clean structure: 400M shares outstanding regardless of the launch outcome, ~$42.50 as they spoke, so ~$17B for the entity collecting management and performance fees on every Pershing fund — current and future.
• Walker’s internal model is $550–590M of adjusted FRE. His bridge from the roadshow’s $300M 2025 FRE figure uses fee-paying AUM of PSH $21.2B, Pershing Square LP $1B, Pershing Square International ~$0.5B, Howard Hughes $5.4B and PSUS closer to $6B by year-end — $34.1B total at a ~1.8% run-rate FRE yield, or $597M, with no credit for the unconfirmed Financial Times-reported “Pershing Square Asymmetric” macro fund.
• Walker’s rueful admission: he bid the IPO at 20x his slightly lower FRE estimate — “the difference between me having a bid filled and not filled. And the stock is about a double since it IPO’d.”

6. Why 30x is the wrong fight: permanence, 50 people, “the Visa of asset managers”

• The comp set — Apollo 30+, Ares very high 20s, then KKR, Blackstone, TPG, Carlyle, Blue Owl and Grosvenor — averages ~27x next twelve months. But those firms bet on private credit and run heavy business-development machines constantly replacing capital; Pershing has $34B of “capital that cannot leave” and a headcount of 50 versus Carlyle’s 2,200+.
• The compounding math Elbaor wants underwritten: roughly 20% annualized over five years means AUM exceeds $60B in three years, and “you’re looking at getting to 90 billion and the employee count is going to be sub 75 people.”
• On the “no manager trades at 50% of AUM” objection: KKR/Blackstone “permanent” capital is really six-year capital — “once that capital leaves, it leaves” — while shrinking Carlyle means real friction costs firing employees. FRE is the right lens: “this is going to be like the Visa of asset managers.”
• Walker adds a point in PS’s favor: the book is almost entirely liquid, verifiable marks — hypothetically realizable in days — versus trusting KKR’s fund marks, illustrated by the private-credit problem in which a fund marked at $100M could later sell its assets for $2M.

7. Alignment, “preferred performance fees,” and the grand-slam problem

• The FRE construction Walker probes: PSH London’s incentive fee is structured so the first 5% of return sends the performance incentive to PS shareholders, with returns above that split roughly 50/50 toward team compensation — producing, in Elbaor’s words, “a significantly cleaner income statement that is much easier to model… and that deserves a higher multiple” than the other asset-manager comps.
• Walker’s incentive critique: if the team is paid from the incentive fee, you’re paid the same at -95% or +5% below the high-water mark but paid on +400% — so swing for grand slams. Elbaor’s rebuttal: that holds only if they owned little of the manco; at 85%+ ownership “you have a complete balance of incentives,” and the structure mirrors how private Pershing compensated employees over the last five years. His signature line: “if shareholders do well, Bill just does a little bit better… it is not heads I win, tails I win, and shareholders lose.”
• Capital allocation: buybacks are “probably off the table by definition” with ~6% floated and ~2% freely tradable; Marlton models an 80% payout ratio, 20% retained for balance-sheet seeds such as anchoring SPARC, PSUS and Howard Hughes, with guidance expected as “question number one” on the first earnings call.

8. Growth, succession, SPARC and “the French” — and the closing valuation split

• To Walker’s growth skepticism — every vehicle at a discount, $5B raised against a $10B target, “kind of tapped out” — Elbaor recounts a lunch where a former venture-investing head insisted “this is never going to launch… nobody’s going to do this.” It became the largest CEF launch in history: “Bill is essentially the Elon Musk of finance.” On “only” raising five: heavy air quotes — it’s still two times the closest peer.
• What’s next: SPARC, whose quarterly legal fees jumped from ~$50–100K to over $1M — “I pay lawyers as much as anybody… to know that they’re working on something” — with the publicly disclosed SPARC proposal involving Universal Music Group and Bill’s CNBC line, “we would not have released that if we hadn’t spoken with the French.” Marlton says its inclination is to invest in an Asymmetric offering, subject to seeing it.
• Key-man risk: Ryan Israel, now CIO, led the entire two-hour PSH annual meeting — “Ryan is like the D Wade to Bill’s LeBron” (Walker needles that the Heat pairing was “not necessarily a one plus one equals three situation”). If Bill is hit by “the proverbial pie truck,” PSH’s capital cannot leave.
• The ending disagreement is the thesis in miniature: Elbaor says underwriting 15%+ compounding alone supports ~30x, and faster growth argues for more given permanence; Walker counters that even S&P-500-like returns underneath make PS “very interesting very quickly” — to which Elbaor agrees it would then deserve “at least an S&P 500 multiple… roughly around 20, 25 times.”