Pershing Square Holdings, Ltd. (PSH) reported that the initial public offering of Pershing Square USA, Ltd. (PSUS) completed with an aggregate offering size of $5 billion. The company said the closing of PSUS’s IPO will translate into lower performance fees for PSH shareholders under an amended Investment Management Agreement.
According to the amendment, adopted in February 2024, PSH’s performance fees are reduced by 20% of management fees that its investment manager earns from funds such as PSUS that do not impose performance fees or allocations. The company framed the change as a mechanism that will directly benefit PSH shareholders by lowering the effective fee burden tied to the manager’s compensated activities.
The IPO of PSUS took place concurrently with the initial public offering of Pershing Square Inc. (PS), which is the parent company of PSH’s investment manager, Pershing Square Capital Management, L.P.
"We are pleased that PSH shareholders will benefit from reduced performance fees going forward as a result of the successful completion of the IPO of PSUS, our new U.S. listed fund," said Bill Ackman, CEO of Pershing Square Inc.
PSH’s chairman, Rupert Morley, commented that the fees generated by PSUS will enable PSH to produce higher long-term returns through the performance fee offset mechanism introduced in the 2024 amendment to the Investment Management Agreement. The company described this as a structural change to the ways management fees and performance fees interact within its fee framework.
The newly adopted fee offset provision supplements an existing clause in the agreement. That existing clause already reduces PSH’s performance fees by 20% of any performance fees and allocations Pershing Square earns from certain non-PSH funds. Together, the provisions create two channels by which fees attributable to the manager’s other funds can lessen the performance fee payable by PSH.
Context and implications
PSH framed the transaction as a direct benefit to shareholders through reduced fee drag, tied specifically to revenues the investment manager receives from funds that lack performance fees or allocations. The company did not provide additional financial projections or quantify expected changes to long-term returns beyond the structural fee reduction described in the amended agreement.