Pershing Square Capital Management: Conviction, Reinvention, and Contrarian Investing

Pershing Square Capital Management is one of the most prominent hedge funds of the modern era, known for bold investments and a focused, long-term approach. While its founder, Bill Ackman, often grabs headlines, the firm's evolution is a story of conviction, reinvention, and standout performance. This article traces that two-decade long journey, growing its assets under management from $54 million to $19.7 billion. Let's dive straight in.

• The breakthrough: Pershing Square gained global attention with its early and profitable short of bond insurer MBIA during the lead-up to the 2008 financial crisis.

• Strategic reinvention: After some high-profile losses in the mid-2010s, the firm overhauled its approach and shifted to a more focused, long-term strategy that defines its model today.

• Core holdings: Pershing Square's concentrated portfolio currently includes major stakes in Uber, Brookfield Corporation, Restaurant Brands International, Howard Hughes Holdings, and Chipotle.

Bill Ackman is widely recognized as one of the most influential investors of his generation, known for his conviction-driven bets, public activism, and sharp analytical style. However, while his personal profile often commands the spotlight, this article centers on the investment firm he founded: Pershing Square Capital Management (PSCM).

That said, the story of Pershing Square cannot be told without Ackman. To understand how Pershing Square came to occupy a prominent place in modern finance, we need to begin with the person behind it and rewind about two decades to trace its origins.

After graduating from Harvard and spending a few years as an analyst, Bill Ackman co-founded his first investment firm, Gotham Partners, with David P. Berkowitz in 1992. The firm delivered strong early returns but eventually became entangled in a series of illiquid investments and legal complications. After nearly a decade of mixed outcomes, Ackman wound down Gotham Partners in the early 2000s.

In 2004, he was ready for a fresh start. This time, on his own. On January 1st of that year, Ackman launched Pershing Square Capital Management, named after Pershing Square Plaza near Grand Central Terminal in New York, where the firm's original office was located.

The fund began with $54 million in capital, drawn from Ackman's personal funds and seed capital from Jefferies Financial Group (then known as Leucadia National). This initial capital was invested through Pershing Square L.P., the firm's flagship hedge fund vehicle. From these modest beginnings roughly two decades ago, Pershing Square has grown into a multi-billion-dollar investment firm, with assets under management reaching $19.7 billion as of 2025.

While Ackman's core investment philosophy has remained consistent, focused on deep research, high-conviction ideas, and long-term value creation, the firm's areas of focus and approach have evolved over time. That evolution will become clear as we trace Pershing Square's path from a $54 million startup to a major force in global finance.

During the early years, one of Pershing Square's early moves was following up on a trade Ackman had taken while with Gotham Partners. In 2002, he published a 66-page report arguing that the bond insurer MBIA (Municipal Bond Insurance Association) had inconsistencies in its financial disclosures and was exposed to risks from guaranteeing complex structured finance products like CDOs (Collateralized Debt Obligations), which bundled subprime loans into securities that would play a central role in the 2008 crisis.

At Pershing Square, he reasserted his short stance on MBIA, aggressively shorting its stock and credit derivatives. While betting that the insurer's exposure to mortgage-backed securities would unravel, he continued publishing detailed research and campaigning publicly, and when the financial crisis hit, Ackman's thesis proved correct. The trade became one of Pershing Square's most profitable and high-profile early wins.

This not only validated Ackman's analysis but also marked Pershing Square's public breakthrough, earning credibility for spotting systemic risk ahead of the curve.

While this structural bet was ongoing, Pershing Square also took activist positions on the long side, pushing for board changes, operational overhauls, and financial restructuring. Some of the notable positions during this period included:

Wendy's International: Pershing Square successfully pressured the company to spin out its Tim Hortons coffee and donut chain, which was conducted through an IPO in 2006.

McDonald's: The firm advocated for a partial real estate spin-off and more aggressive franchising to unlock shareholder value, ultimately leading the company to increase share buybacks and streamline operations.

Target Corporation: Pershing Square launched a campaign focused on improving capital efficiency and monetizing the company's real estate assets. Though the firm lost its proxy battle in 2009, the campaign helped surface important governance and structural questions.

In the years that followed, Pershing Square continued to pursue high-conviction activist investments in companies such as JCPenney, Canadian Pacific Railway (now part of Canadian Pacific Kansas City), Procter & Gamble, Air Products & Chemicals, Chipotle Mexican Grill, and others.

Notably, this period marked the beginning of Pershing Square's long-standing position in Restaurant Brands International (RBI). The investment originated when 3G Capital, a private equity firm with close ties to Warren Buffett, acquired Burger King in 2010. In 2014, Burger King merged with Tim Hortons in a high-profile deal backed by Buffett's Berkshire Hathaway. As RBI became a publicly traded entity, Pershing Square emerged as one of its largest shareholders, which it continues to be to this day.

Also ongoing at this point, Pershing Square engaged in a number of bold and controversial trades. Positions that were publicly followed and, ultimately, deeply unprofitable. These trades marked a turning point for the firm and would later be seen as defining moments of what Pershing Square calls “The Challenging Period.”

One of the most well-known examples was Pershing Square's short position in Herbalife, a multi-level marketing company he publicly accused of being a pyramid scheme. Pershing Square initiated a $1 billion short in 2012 and launched an aggressive media and lobbying campaign to support its thesis. The trade turned into a prolonged, high-stakes battle that drew in other hedge fund titans, most notably Carl Icahn, who took the opposite side of the trade and became a major Herbalife shareholder.

Despite years of public pressure and regulatory scrutiny, Herbalife survived, and the stock ultimately rose. Pershing Square closed its position in 2018 at a significant loss, ending one of the most visible and combative activist campaigns in modern hedge fund history.

Another painful episode came with Pershing Square's investment in Valeant Pharmaceuticals. Initially seen as a model of aggressive cost-cutting and growth-through-acquisition, Valeant became a hedge fund favorite. Pershing Square invested heavily in 2015, building a stake worth billions and securing two board seats. However, the company soon came under fire for its drug pricing practices, opaque accounting, and overreliance on acquisitions. Its stock collapsed amid regulatory and political scrutiny, and Pershing Square ultimately exited the position in 2017, incurring a loss of over $4 billion, one of the worst in the firm's history.

Although these experiences damaged Pershing Square's performance and reputation in the short term, they also catalyzed a period of reflection and change. The underperformance that followed led it to reevaluate the firm's approach. What emerged from that reckoning was a more disciplined strategy and a more stable investment structure. The firm calls it “the Permanent Capital Era.”

As noted earlier, Pershing Square's approach has evolved over time, but certain principles have remained consistent. The firm still invests with conviction, takes concentrated positions, and conducts deep fundamental research. However, in recent years, its strategy has become more measured and less publicly combative, favoring behind-the-scenes engagement and long-term value creation over high-profile activist battles.

Today, the majority of Pershing Square's capital is invested in a small set of large, liquid, publicly traded North American companies, typically between 8 and 12 core holdings. These businesses tend to be high-quality, cash-generative, and resilient, with management teams and structures that Pershing Square believes can deliver durable returns. While the firm still seeks to influence governance or operations where it sees opportunity, those efforts are now more targeted and less visible than in the past.

New positions are added selectively, typically ranging from one to three core investments per year. Pershing Square looks for companies with strong competitive positions, low macroeconomic sensitivity, and the ability to grow predictable cash flows over time. Complexity, whether in legal structure, capital markets exposure, or other situational factors, is not a deterrent for the firm. On the contrary, Pershing Square often sees it as an opportunity, so long as the risks are well understood and the potential upside is compelling.

While not structural in the same way, this contrarian mindset was evident in the firm’s most recent portfolio addition. We'll explore this in more detail shortly.

Alongside its core equity strategy, Pershing Square also makes use of hedging tactics. These are typically designed to protect against broad market downturns or to capitalize on asymmetric opportunities. The firm's 2020 COVID-era credit hedge is a prime example: a $27 million position that yielded $2.6 billion in profit as markets tumbled, cementing its reputation for bold, high-reward tactical moves.

As noted earlier, Restaurant Brands International (RBI) remains one of Pershing Square's core holdings, with the firm maintaining a roughly 12% ownership stake. Another significant position is Brookfield Corporation, added in 2024, which now represents approximately 18% of the portfolio.

The fund's largest current holding is Uber Technologies, a position initiated in early 2025. Pershing Square believes Uber is well-positioned to benefit from the commercialization of autonomous vehicles within its ride-hailing business. While market sentiment has focused on the long-term risk that AVs might disrupt Uber's model, Pershing sees the opposite: a structural tailwind. This disconnect between perceived threat and strategic advantage led the firm to describe Uber's stock as having an “extremely dislocated valuation.”

In Pershing Square Holdings (the publicly traded closed-end fund managed by Pershing Square Capital Management) Q1 2025 Investor Call, it outlined the firm's long-term thesis on Uber. Investment analyst Charles Korn described the opportunity as follows (sourced through Quartr Pro):

Other notable holdings, listed by portfolio weight, include Alphabet, Howard Hughes Holdings, Chipotle Mexican Grill, Canadian Pacific Kansas City, Hilton Worldwide Holdings, Universal Music Group, Seaport Entertainment Group, and Hertz.

Among its more high-profile investments in recent years is its position in Nike, acquired in 2024. After several years of underperformance, Pershing Square saw potential for a turnaround. Soon after the firm disclosed its stake, Elliott Hill, a former Nike executive, returned to help lead the company's transformation.

Less than a year later, Pershing Square shifted its position from common equity to long-dated call options, freeing up capital while maintaining exposure. In its 2024 Annual Report for Pershing Square Holdings, the hedge fund explained its rationale (sourced through Quartr Pro):

Since its inception in 2004, Pershing Square Capital Management has evolved its structure to support a long-term investment approach. The firm initially managed capital through two core hedge funds: Pershing Square L.P., its flagship U.S. fund, and Pershing Square International, Ltd., its offshore equivalent for non-U.S. investors. In 2012, it expanded its structure by launching Pershing Square Holdings (PSH), a publicly traded closed-end fund listed on the London Stock Exchange, which is its most transparent investment vehicle, regularly disclosing portfolio composition and performance metrics.

In 2020, PSCM introduced a SPAC called Pershing Square Tontine Holdings, which was later liquidated in 2022 after failing to complete a business combination. Building on this experience, PSCM has developed a novel structure called SPARC (Special Purpose Acquisition Rights Company). Unlike traditional SPACs, a SPARC does not raise capital upfront. Instead, it issues rights (SPARs) to investors, allowing them to participate in a future business combination. Though no SPARC transaction has occurred yet, this structure aims to mitigate the time pressure and dilution concerns associated with SPACs.

Bill Ackman serves as the CEO and Portfolio Manager of PSCM, maintaining overall responsibility for the firm's investment decisions. In 2022, Ryan Israel, who had been with the firm since 2009, was appointed as Chief Investment Officer. In this role, he oversees the investment team and plays a central role in identifying and managing portfolio investments.

Other key members of the leadership team include Nicholas Botta, who transitioned from President to Vice Chairman in 2024, and Ben Hakim, who was appointed as President in the same year.

Over the years, Pershing Square's track record has been more than respectable. What started as a $54 million fund in 2004 has grown into a $19.7 billion investment firm. While the launch of its listed Pershing Square Holdings added structural stability, the real driver has been performance.

Since its inception, Pershing Square L.P. has delivered a compound annual return of 15.1%. Through reinvention, focus, and a willingness to back high-conviction ideas, Bill Ackman has shaped Pershing Square into one of the most consistent and closely followed hedge funds of the modern era.