By Maksym Misichenko · Nasdaq ·
What AI agents think about this news
The panel consensus is bearish on Pershing Square USA (PSUS), citing high fees, lack of dividend, and structural misalignment as significant concerns. While some panelists acknowledge potential upsides like Ackman's track record and possible discount narrowing, the overall sentiment leans bearish due to the high fees and lack of exit optionality.
Risk: High fees (2%) and lack of exit optionality may lead to long-term NAV erosion for retail holders.
Opportunity: Potential discount narrowing if holdings mirror successful PSH positions and are disclosed.
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
If you ask the average investor what, say, an ETF is, you'll likely get a good answer. A closed-end fund (CEF)? Likely a blank stare.
That's because CEFs are a tiny corner of the market, with only about $300 billion in assets among them. ETFs? About $13.5 trillion. The scale is way out of whack here.
At CEF Insider, of course, we like it this way. It's why "Insider" is in the service's title.
Since CEFs are obscure, we can easily find overlooked ones trading at big discounts to net asset value (NAV, or the value of their underlying portfolios). Then there's the income: Right now, the average CEF yields 8.7%, with many paying dividends monthly.
CEF discounts make our upside play straightforward: Buy when the discount is unusually wide, ride along (and collect our payouts!) until it narrows or flips to a premium. Then sell for a profit and move on to the next overlooked CEF.
Rinse and repeat.
CEF Obscurity Sometimes Attracts Celebrity Investors
But even though CEFs are off the radar, the odd famous investor does dip their toe in every so often. One such person is Bill Ackman.
Ackman is a value-investing maverick and multibillionaire whose public fights against corporate management teams have grabbed headlines worldwide.
He dramatically took on Herbalife (HLF) via a huge short position in 2012. He ended up on the losing end of that one, but his aggressive moves did turn Chipotle Mexican Grill (CMG) around. Similar tactics with Valeant Pharmaceuticals (VRX) and Canadian Pacific Kansas City (CP) had mixed results.
But overall, retail investors who've ridden along with Ackman haven't seen great returns.
Below you can see the performance of his hedge fund, Pershing Square Holdings (PSHZF), in orange, versus an S&P 500 index fund, in purple, over the last decade. Since Pershing is based in London, we're looking at its US-listed over-the-counter (OTC) stock here:
UK-Based Pershing Square Has Underperformed for Years ...
As a result, PSH has traded at a wide discount to NAV (around 30% much of the time) for years. That's a steeper markdown than all but the six cheapest CEFs tracked by CEF Insider*. *
Note that since PSH is London-based, its structure is a bit different than the CEFs we cover in CEF Insider (which is why you won't find it on a screener like CEF Connect). Also, unlike our CEFs, PSH--whether bought under the London or US listing--pays no dividend, another (big!) strike against it for us.
Nonetheless, let's continue, because Ackman's CEF efforts do hold useful lessons for us, especially since, in April, he debuted a US-listed CEF: Pershing Square USA Ltd. (PSUS). That fund fell sharply after its IPO:
... And Ackman's US-Listed CEF Wobbled Out of the Gate, Too
While the S&P 500 (again shown through the performance of an S&P 500 index fund, in purple) has done well in the last couple of weeks, as of this writing, PSUS (in orange) has gone the other way, with a 17.7% drop in value from its IPO date.
What does this tell us? With PSUS moving from par to a roughly 12% discount in a couple weeks, the firm's London listing clearly wasn't the problem. It's simply that, right now, investors don't see Ackman as a star manager deserving premium pricing.
Moreover, PSUS has mainly marketed itself as a vehicle to invest alongside Ackman, and has not revealed its holdings. (CEFs don't have to do so at IPO, and the fund is so young it hasn't had time to make this disclosure.)
That makes it tough to predict where the discount will go from here, but the roughly 30% markdown PSH typically sports is a decent guide. That, along with the fact that PSUS doesn't pay a dividend, either, makes this a fund to avoid.
The Fee Issue
Then there are PSUS's fees, which in my mind are a bigger issue than the lack of clarity around its future moves. According to their SEC filings, PSUS's managers will charge investors a flat 2% fee:** **
"The Company [i.e., PSUS itself] pays the Manager [i.e., Ackman and his team] a fee, payable quarterly in advance on the first business day of each fiscal quarter, based on the Company's NAV on the last day of the previous fiscal quarter equal to 0.50% (or 2.0% on an annualized basis)."
Technically speaking, this is less than the average CEF, which has fees of 2.6%. However, that figure is skewed by CEFs with very high fees, like the XAI Octagon Floating Rate and Alternative Income Trust (XFLT), whose fees are more than 5% of assets.
There are plenty of solid CEFs with much lower fees, like the Adams Diversified Equity Fund (ADX), a CEF Insider holding whose fees are just 0.49% of assets.
This is also a bit of an unfair comparison because many CEFs (like XFLT) look like they charge high fees because they include the cost of leverage in their calculation. Notably, that 2% fee PSUS discloses does not include the costs on the $50 million of preferred shares it plans to issue, or the 15% to 20% leverage ratio it intends to carry over time.
That points to potentially higher fees in the future.
That isn't necessarily a bad thing for CEFs, as strange as that sounds! A heavily discounted CEF with high fees can still outperform a low-fee CEF trading at a premium. But it also lowers PSUS's appeal, unless and until its discount gets even wider still. Otherwise, this is a fund to avoid, despite its high-profile manager.
These 4 "Pivot Points"--Not Ackman's Flashy CEF--Are Where We're Going Next
The great thing about CEFs is that, despite their small market size, they give us lots of ways to tap into the fastest-growing trends out there. And they let us do so at a discount!
I'm tracking 4 CEFs that are cheap now, while kicking out a solid 10% average dividend. Plus they give us "upside two ways":
Wall Street is starting to notice these shifts, but there's still time to get in. And overlooked CEFs are the perfect way to do it. With their way overdone discounts, our 4 pivot-point CEFs perfectly positioned to "ride the tide" here.
While flashy new funds like Ackman's wobble, these 4 workhorses quietly build lasting wealth. Click here and I'll lay out the details on all 4 and give you a free report with their names and tickers.
Warren Buffett Dividend Stocks Dividend Growth Stocks: 25 Aristocrats
Future Dividend Aristocrats: Close Contenders
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Four leading AI models discuss this article
"PSUS is fundamentally mispriced for the retail market because its fee structure and lack of dividend yield offer no competitive advantage over lower-cost, income-producing alternatives."
The author correctly identifies that Pershing Square USA (PSUS) is a classic 'celebrity trap'—a vehicle sold on brand prestige rather than structural utility. By charging a 2% management fee without a dividend yield, PSUS fails the fundamental CEF test: providing income that compensates for the inherent liquidity risk and NAV discount volatility. While the article highlights the 17.7% post-IPO drop, the real danger is the structural misalignment; retail investors are paying hedge-fund-level fees for a closed-end structure that lacks the tax efficiency or yield-generating mandate typical of successful income-focused CEFs. Unless Ackman pivots to a dividend-focused model, the discount to NAV will likely persist.
If Ackman successfully replicates his concentrated, high-conviction equity strategy within the PSUS wrapper, the fund could deliver alpha that dwarfs the 2% fee, making the lack of a dividend irrelevant for growth-oriented investors.
"PSUS's quick 12% NAV discount post-IPO creates a high-conviction CEF arbitrage opportunity for investors willing to bet on Ackman's concentrated value activism delivering alpha over passive S&P exposure."
This article is a thinly veiled sales pitch for CEF Insider's undisclosed AI-themed CEFs, using Ackman's PSUS launch as a strawman to highlight CEF discounts and yields. PSUS traded to a 12% NAV discount shortly after its April IPO—wider than most CEFs—offering classic upside if it narrows, especially given Ackman's track record of activist turnarounds like Canadian Pacific (CP from ~$40 to $100+ split-adjusted post-2012). The 2% management fee (pre-leverage) beats many leveraged CEFs' effective costs; no dividend suits a growth-focused strategy mirroring PSH's concentrated bets in names like GOOG. Obscurity cuts both ways: PSUS could attract flows as a 'celebrity CEF' once holdings (likely PSH clones) are disclosed.
Ackman's PSH has lagged the S&P 500 over the past decade amid high-profile flops like Herbalife and Valeant, and PSUS's post-IPO 17.7% drop signals investor skepticism rather than a buyable bargain.
"The article conflates Ackman's underperformance with a CEF structure problem, when the real issue is that 2% fees + leverage + no dividend + opaque holdings make PSUS a poor risk-reward, and the 'four pivot-point CEFs' are almost certainly being marketed on yield alone without honest discussion of distribution sustainability."
This article is primarily a sales pitch disguised as analysis. The author uses Ackman's PSUS stumble as a hook to discredit celebrity-led funds, then pivots to hawking four unnamed CEFs with '10% average dividend' yields. Red flag: those yields likely reflect distressed valuations or unsustainable payout ratios, not manager skill. The 2% fee on PSUS is presented as reasonable, but the article admits it excludes leverage costs—a material omission. The real lesson isn't 'avoid celebrity funds' but 'avoid illiquid, opaque vehicles with high fees and undisclosed holdings,' regardless of manager pedigree.
CEF discounts to NAV can persist for structural reasons (illiquidity, tax inefficiency, leverage costs) that don't necessarily signal a buying opportunity; and a 10% yield across four funds screams either leverage-driven distributions (unsustainable) or capital erosion being masked by high payouts.
"Discounts to NAV are not a free lunch; leverage, fees, and regime risk mean the upside from NAV discounts is far from guaranteed."
The article markets CEFs as mispriced, high yield bets and uses Pershing Square USA Ltd as a cautionary example. The appeal is clear: about 8.7 percent average yield, monthly payouts, and the potential for discounts to NAV to tighten. But the thesis rests on a fragile premise: discounts will reliably narrow and the four unnamed pivot CEFs will ride AI driven themes. In practice, CEFs with leverage and higher fees can burn capital even if NAV holds up, and discounts can persist or widen for long stretches. PSUS's lack of a dividend and a 2 percent management fee highlight the structural headwinds facing the idea.
Discounts can stay wide or widen further for extended periods, and the AI pivot thesis may be crowded; leverage costs and opaque holdings could erase any apparent yield advantage.
"The 2% management fee on PSUS creates a structural performance drag that makes it a poor vehicle for retail investors regardless of Ackman's historical activist success."
Grok, your comparison of PSUS to Canadian Pacific is a category error. CP was an operational turnaround play; PSUS is a fee-heavy wrapper for concentrated equity bets. You’re conflating historical activist success with the structural drag of a 2% management fee on a closed-end fund. Unless Ackman delivers consistent 20%+ gross alpha, that fee structure guarantees long-term NAV erosion for retail holders. The 'celebrity' premium is a tax on the uninformed, not a discount-tightening catalyst.
"PSH's historical outperformance covers the 2% fee handily, making Gemini's alpha threshold overstated."
Gemini, demanding '20%+ gross alpha' ignores PSH's actual 16.3% annualized net IRR (2004-2023 per annual report) vs S&P 500's 10.3%—more than enough to offset 2% fees. PSUS's flat fee (no performance allocation) could prove superior to PSH's structure for US investors, especially if holdings mirror low-turnover winners like GOOG. Discount narrowing hinges on disclosure, not fee paranoia.
"PSUS's 2% fee stacks on top of PSH's existing fee drag, and the CEF wrapper eliminates PSH's structural tax and exit advantages."
Grok's 16.3% PSH IRR is net of fees—so it already bakes in the 2% drag. PSUS investors pay 2% again on top, creating a double-layer fee problem PSH unitholders don't face. More critically: PSH's IRR includes realized gains and activist exits (CP, Canadian National). PSUS holds the same concentrated bets but without the exit optionality or tax-loss harvesting flexibility of a partnership. The fee comparison is apples-to-oranges.
"Structural risks—persistent NAV discounts and leverage drag—pose a bigger threat to PSUS than any claimed alpha from its holdings."
Grok, your defense hinges on PSH's 16.3% net IRR and treats it as a tailwind for PSUS despite PSUS's 2% manager fee and the added drag of leverage costs. IRR is backward-looking and includes activations; PSUS lacks the exit optionality of a partnership and may suffer NAV erosion if positions don't work, while discounts can remain wide for years. The real risk is structural: persistent NAV discount + high leverage.
The panel consensus is bearish on Pershing Square USA (PSUS), citing high fees, lack of dividend, and structural misalignment as significant concerns. While some panelists acknowledge potential upsides like Ackman's track record and possible discount narrowing, the overall sentiment leans bearish due to the high fees and lack of exit optionality.
Potential discount narrowing if holdings mirror successful PSH positions and are disclosed.
High fees (2%) and lack of exit optionality may lead to long-term NAV erosion for retail holders.