Pershing Square Holdings, Ltd. Public Class USD Accum.Shs · LSE:PSH
Pershing Square Holdings, Ltd. Public Class USD Accum.Shs — Pershing Square Holdings — Investor Presentation (February 2023)
62 slides from Pershing Square Holdings, Ltd. Public Class USD Accum.Shs's investor presentation, Feb 9, 2023
Slide 1: Annual Investor Presentation
Annual Investor Presentation February 9, 2023
Slide 2: Disclaimer
Disclaimer All information provided herein is for informational purposes only and should not be deemed as a recommendation to buy or sell any security mentioned. Pershing Square Capital Management, L.P. (“Pershing Square”) believes this presentation contains a balanced presentation of the performanc
Slide 3: Agenda
Agenda Chairman’s Introduction 2022 PSH Performance Review Business & Organizational Update Portfolio Update Q&A
Slide 4: Chairman's Introduction
Chairman’s Introduction
Slide 5: Board of Directors of PSH
Board of Directors of PSH All directors are independent of the Manager other than Nicholas Botta Board Director Summary Experience ‾ Director, Caledonia Investments plc and BlueRiver Acquisition Corp. Anne Farlow ‾ Former Director, Investec Asset Management Independent Director Chairman of the Board
Slide 6: PSH Board Process
PSH Board Process Quarterly meetings; additional meetings as needed Review and monitor Investment performance and portfolio Operational risk management Investor relations Share price performance Expenses Regulatory matters Board Committees (membership limited to independent directo
Slide 7: PSH Board Additional Matters Considered in 2022
PSH Board Additional Matters Considered in 2022 2022 bond redemption and debt strategy Strategies for addressing discount to NAV Share buybacks Dividend policy ESG considerations Pershing Square Tontine Holdings, Ltd. (NYSE:PSTH) Netflix investment Hedging strategy 7
Slide 8: Overview of 2022 Performance
Overview of 2022 Performance In 2022, PSH’s NAV declined (8.8%) and total shareholder return was (14.6%) Annualized Returns Market Indices HFRX Indices PSH S&P FTSE MSCI Equity Period NAV Share Price 500 100 (1) World Activist (2) Hedge (2) 2022 (8.8%) (14.6%) (18.1%) (6.5%) (17.7%) (2.2%) (3.2%) 3-
Slide 9: 2022 Corporate Actions: Bond Redemption
2022 Corporate Actions: Bond Redemption PSH redeemed the remaining $631 million balance of its 2022 bonds on June 15, 2022 PSH Capital Structure - December 31, 2022 ($ in mm) 12/31/2022 Total Capital $12,215 Coupon Maturity Issue Date (1) Weighted average 2027 Bonds (Public Offering) | €500mm EUR
Slide 10: Total Debt to Total Capital Ratio Over Time
Total Debt to Total Capital Ratio Over Time Regardless of market or portfolio volatility, PSH has continuously maintained conservative leverage levels and investment grade ratings Total Debt to Total Capital Ratio | 6/30/2015 to 12/31/2022: 10/4/21: Redeemed 10/1/21: Issued $700mm of $369mm of 5.500
Slide 11: Long-Term Debt Financing Strategy
Long-Term Debt Financing Strategy Our ability to access low-cost, investment grade, long-term debt is an important competitive advantage for PSH PSH has attractive credit characteristics Simple, transparent and highly liquid investment portfolio Significant asset coverage: PSH debt is covered
Slide 12: Strategies to Address the Discount
Strategies to Address the Discount Strong investment performance Compound annual net returns above 25% for the last five years(1) Global marketing efforts outside of the United States Inclusion of PSH in the FTSE 100 index in December 2020 AIC reclassification from Hedge Funds to US Equity
Slide 13: PSH and ESG
PSH and ESG PSH is an investment company without employees or physical operations The PSH Board has delegated the responsibility for making individual investment decisions to the Investment Manager and has encouraged the Investment Manager to: Consider ESG best practices within its own organiz
Slide 14: The Investment Manager and ESG
The Investment Manager and ESG ESG risks are analyzed as part of the Investment Manager’s due diligence process A business that has not addressed material ESG risks or that has unsustainable business practices will not meet the Investment Manager’s investment criteria unless its investment inten
Slide 15: 2022 Performance Review
2022 Performance Review
Slide 16: Substantial Outperformance vs. S&P 500 Benchmark
Substantial Outperformance vs. S&P 500 Benchmark 1 2022 Return: PSH Net of Fees vs. Indices Total Return (2.2%) (3.2%) (6.5%) (8.8%) (18.1%) (17.7%) PSH S&P 500 FTSE MSCI HFRX HFRX Equity 100(1) World Activist Hedge Index(2) Index(2) Reflects returns from 12/31/21 through 12/31/22, including dividen
Slide 17: PSLP / PSH Annual Net Returns
Pershing Square L.P. (“PSLP”) / PSH Annual Net Returns Annual Net Returns Year PSLP / PSH S&P 500 2004 42.6% 10.9% 2005 39.9% 4.9% 2006 22.5% 15.8% 2007 22.0% 5.5% PSLP 2008 (13.0%) (37.0%) 2009 40.6% 26.5% 2010 29.7% 15.1% 2011 (1.1%) 2.1% 2012 13.3% 16.0% 2013 9.6% 32.4% 2014 40.4% 13.7% 2015 (20.
Slide 18: PSLP / PSH Cumulative Net Returns
PSLP / PSH Cumulative Net Returns Net Returns vs. S&P 500 through December 31, 2022 PSH PSLP / PSH 1,552.2% 403.3% 206.9% 211.7% 226.1% 96.9% 56.8% 24.7% (8.8%) (18.1%) 1-Year 3-Year 5-Year Since PSH Inception Since Firm Inception (12/31/2012) (1/1/2004) PSLP / PSH S&P 500 Note: PSLP/PSH data repres
Slide 19: 2022 Contributors
2022 Contributors (1) Contributors Gross Net Interest Rate Swaptions 14.3% 14.2% Restaurant Brands International 1.4% 1.3% Accretion from Share Buybacks 1.2% 1.2% Energy Hedge 0.5% 0.5% Canadian Pacific 0.5% 0.4% Total Contributors 17.9% 17.6% Note: Positions with contributions to performance of 50
Slide 20: 2022 Detractors
2022 Detractors Detractors Gross Net(1) Lowe's (4.5%) (4.7%) Netflix (3.9%) (3.9%) Chipotle Mexican Grill (3.1%) (3.3%) Domino's Pizza (2.8%) (2.9%) Universal Music Group (2.5%) (2.8%) Hilton Worldwide (2.3%) (2.5%) Howard Hughes Corporation (2.0%) (2.1%) Pershing Square Tontine Holdings (1.3%) (1.3
Slide 21: Strategy Has Proven to be Defensive in Down Markets
Pershing Square’s Strategy Has Proven to be Defensive in Down Markets PSLP / PSH Average Monthly Net Returns vs. S&P 500 through December 31, 2022 Average Monthly Average Return in Average Return in Return Up Months Down Months 4.0% 3.0% 3.1% 3.0% 2.0% 1.4% 0.8% 1.0% 0.0% (1.0%) (2.0%) (2.0%) (3.0%)
Slide 22: PSH Average Monthly Net Return vs. S&P 500
PSH Average Monthly Net Return vs. S&P 500 PSH Average Monthly Net Returns vs. S&P 500 through December 31, 2022 Average Monthly Average Return in Average Return in Return Up Months Down Months 4.0% 3.2% 2.9% 3.0% 2.0% 1.1% 1.1% 1.0% 0.0% (1.0%) (2.0%) (3.0%) (3.1%) (4.0%) (3.9%) PSH S&P 500 Note: D
Slide 23: Total Assets Under Management
Total Assets Under Management AUM(1) Insider Capital (2) As of 2/7/2023 ($ in millions) Total Equity Total % of Equity Pershing Square Holdings ("PSH") $12,916 $10,580 $2,771 26% Pershing Square, L.P. ("PSLP") 1,316 1,316 573 44% Pershing Square International ("PSI") 551 551 199 36% Total Core Funds
Slide 24: Business and Organizational Update
Business and Organizational Update
Slide 25: 2022 Key Developments
2022 Key Developments The funds meaningfully outperformed the S&P 500 in 2022 as our hedging strategy protected the portfolio from the impact of rising interest rates Monetized interest rate hedges initiated in late 2020 and early 2021 Initiated new hedges related to long-term interest rates, cu
Slide 26: Pershing Square's Core Hedging Principles
Pershing Square’s Core Hedging Principles We seek to opportunistically invest in hedges to protect our portfolio against specific macroeconomic risks and capitalize on market volatility Asymmetric payoff structures Limited upfront investment and carrying costs Opportunities to generate large (
Slide 27: Overview of Interest Rate Hedge
Overview of Interest Rate Hedge Beginning in December 2020, we acquired out-of-the-money interest rate swaptions to protect our portfolio against an unexpected rise in interest rates Summary of Interest Rate Hedging Program $ in mm Premium Proceeds / Multiple of Capital Tenor / Instrument Paid Marke
Slide 28: Track Record of Defensive Hedging
Track Record of Defensive Hedging Pershing Square’s hedging strategy has generated substantial gains across multiple volatile market environments since the firm’s inception Hedging Investment / Total Multiple of Capital Risk Factor Time Period Instrument Carrying Costs Proceeds Gross Net (4) CDS on
Slide 29: Strong Performance During the Global Financial Crisis
Strong Performance During the Global Financial Crisis During the Global Financial Crisis, from December 2007 to June 2009(1), PSLP outperformed the S&P 500 by 3,200 basis points PSLP Indexed Net Return vs S&P 500 | 11/30/2007 to 6/30/2009: 20% March 2009 peak losses: S&P 500: 52.9% 10% PSLP: 18.2% 0
Slide 30: Strong Performance During the COVID Crisis
Strong Performance During the COVID Crisis PSH delivered strong 2020 performance with a net return of 70.2%, outperforming the S&P 500 by 5,180 basis points PSH Indexed Net Return vs S&P 500 | 12/31/2019 to 12/31/2020: 80% March 2020 peak losses: 70.2% 70% S&P 500: 30.4% 60% PSH: 11.2% 50% 40% Retur
Slide 31: Strong Outperformance in 2022
Strong Outperformance in 2022 PSH outperformed the S&P 500 by 930 basis points in 2022, a year marked by heightened geopolitical uncertainty and record inflation PSH Indexed Net Return vs S&P 500 | 12/31/2021 to 12/31/2022: 5% 0% 12/31 1/31 2/28 3/31 4/30 5/31 6/30 7/31 8/31 9/30 10/31 11/30 12/31 (
Slide 32: PSTH and Pershing Square SPARC Holdings
Pershing Square Tontine Holdings (“PSTH”) and Pershing Square SPARC Holdings (“SPARC”) PSTH returned $4 billion of capital to shareholders as we were unable to consummate a transaction that both met our criteria and was executable On July 26, 2022, each shareholder received $20.06 of cash per sh
Slide 33: Pershing Square SPARC Holdings (SPARC)
Pershing Square SPARC Holdings (“SPARC”) SPARC solves the problems of conventional SPACs and improves upon PSTH’s structure No initial blank check IPO; no cash is held in trust until deal closure SPARs are distributed for no consideration to former PSTH shareholders and warrantholders and are in
Slide 34: Organizational Update
Organizational Update Lean, collaborative, and investment-centric organization continues to perform at the highest levels Ryan Israel promoted to Chief Investment Officer in August 2022 14 years with Pershing Square since joining from Goldman Sachs in March 2009 Bill will continue as CEO and P
Slide 35: PSCM Organization Chart
PSCM Organization Chart Operational Leadership Group Member New Employee 35
Slide 36: Pershing Square Investment Team
Pershing Square Investment Team Career PSCM Employee Education and Summary Prior Experience Experience Tenure (Years) (Years) Gotham Partners, Co-Founder and Portfolio Manager (1992 - 2003) Bill Ackman M.B.A., Harvard Business School, 1992 31 19 CEO / Portfolio Manager A.B., Harvard College, magna c
Slide 37: Portfolio Update
Portfolio Update
Slide 38: Universal Music Group (UMG)
Universal Music Group (“UMG”) UMG is a high-quality, capital-light, rapidly growing royalty on greater music consumption Decades-long runway for growth Massive addressable market, strong customer value proposition, and dominant market position Continued global consumer adoption of streaming crea
Slide 39: UMG Share Price Performance Since IPO
UMG Share Price Performance Since IPO UMG’s share price including dividend reinvestment decreased 7% in 2022 and has increased 3% year-to-date in 2023(1) UMG Share Price Performance from 9/21/2021 to 2/7/2023 (€EUR): 9/21/21: UMG completes € 30 separation from Vivendi and 7/1/22: CRB affirms decisio
Slide 40: Lowe's (LOW)
Lowe’s (“LOW”) Lowe’s is a high-quality business with significant long-term earnings growth potential Divergent macroeconomic picture creating investor uncertainty Rising interest rates pressuring buyer affordability and home sales velocity Stable home improvement category supported by an aging
Slide 41: LOW Share Price Performance Since Inception
LOW Share Price Performance Since Inception LOW’s share price including dividend reinvestment decreased 21% in 2022 and has increased 8% year-to-date in 2023(1) LOW Share Price Performance From 4/6/2018 to 2/7/2023: 12/7/22: LOW 2022 Analyst Day. $270 Demonstrates substantial operational progress ac
Slide 42: Chipotle Mexican Grill (CMG)
Chipotle Mexican Grill (“CMG”) Chipotle’s impressive growth continued in 2022 driven by the recovery of in-store ordering and price increases to offset cost inflation Industry-leading same-store sales growth and profitability Same-store sales (“SSS”) grew 8% in 2022, or 31% from 2019 levels Whil
Slide 43: CMG Share Price Performance Since Inception
CMG Share Price Performance Since Inception CMG’s share price decreased 21% in 2022 and has increased 24% year-to- date in 2023(1) CMG Share Price Performance From 8/4/2016 to 2/7/2023: 11/16/22: CMG opens 500th restaurant with a Chipotlane $2,000 7/20/21: Average digital drive-thru restaurant sales
Slide 44: Restaurant Brands International (QSR)
Restaurant Brands International (“QSR”) QSR is a high-quality business with significant long-term growth potential trading at a highly discounted valuation Comparable sales trends continue to improve Tim Hortons Canada same-store sales improved to mid-single-digits above pre-COVID levels during Q3
Slide 45: QSR Share Price Performance Since Inception
QSR Share Price Performance Since Inception QSR’s share price including dividend reinvestment increased 11% in 2022 and has increased 5% year-to-date in 2023(1) QSR Share Price Performance From 6/19/2012 to 2/7/2023: 11/15/21: QSR announces $80 1/23/19: QSR announces leadership acquisition of Fireho
Slide 46: Hilton Worldwide (HLT)
Hilton Worldwide (“HLT”) Hilton is a high-quality business with a long runway of strong earnings growth and an exceptional management team Industry conditions continue to be supportive Average daily revenue per room (“RevPAR”) now above pre-COVID levels despite occupancy still below pre-COVID leve
Slide 47: HLT Share Price Performance Since Inception
HLT Share Price Performance Since Inception HLT’s share price including dividend reinvestment decreased 19% in 2022 and has increased 17% year-to-date in 2023(1) HLT Share Price Performance From 10/8/2018 to 2/7/2023: 10/26/22: HLT reports first quarter with systemwide $170 RevPAR above 2019, despit
Slide 48: Howard Hughes Corporation (HHC)
Howard Hughes Corporation (“HHC”) HHC’s uniquely advantaged business model of owning master planned communities (“MPCs”) drives resilient, long-term value creation Robust performance amidst a challenging macroeconomic backdrop Land sales supported by supply-demand imbalance and low housing invento
Slide 49: HHC Share Price Performance Since Inception
HHC Share Price Performance Since Inception HHC’s share price decreased 25% in 2022 and has increased 14% year-to- date in 2023(1) HHC Share Price Performance From 11/9/2010 to 2/7/2023: 11/28/22: Pershing Square 6/27/19: HHC announces 10/21/19: HHC Board purchases 1.6mm shares of HHC its Board of D
Slide 50: Fannie Mae (FNMA) and Freddie Mac (FMCC)
Fannie Mae (“FNMA”) and Freddie Mac (“FMCC”) Despite unsuccessful outcomes in the courts, we believe Fannie and Freddie remain valuable perpetual options on exit from conservatorship Adverse court rulings have effectively ended shareholder litigation Supreme Court denied certiorari in Court of Fed
Slide 51: FNMA and FMCC Share Price Performance Since Inception
FNMA and FMCC Share Price Performance Since Inception FNMA and FMCC share prices both declined 57% in 2022 and have increased 32% and 31%, respectively, year-to-date in 2023(1) FNMA and FMCC Share Price Performance from 10/7/2013 to 2/7/2023: 9/6/19: Fifth Circuit 5/5/14: Pershing Square ruling in C
Slide 52: Canadian Pacific (CP)
Canadian Pacific (“CP”) CP’s pending acquisition of Kansas City Southern (“KCS”) will create a unique North American railroad led by a superb management team High-quality business model Operates in an oligopolistic industry with significant barriers to entry Large bulk franchise (grain, coal, po
Slide 53: CP Share Price Performance Since Inception
CP Share Price Performance Since Inception CP’s share price including dividend reinvestment increased 12% in 2022 and has increased 3% year-to-date in 2023(1) CP Share Price Performance From 10/11/2021 to 2/7/2023 ($CAD): 1/27/23: Surface Transportation Board $115 releases final Environmental Impact
Slide 54: Exited Positions
Exited Positions
Slide 55: NFLX Share Price Performance Since Inception
NFLX Share Price Performance Since Inception NFLX’s share price decreased 44% since inception through our last share sale on April 20, 2022(1) NFLX Share Price Performance From 1/21/2022 to 4/20/2022(1): $500 $400 $395* Share price $300 4/19/22: NFLX reports Q1’22 earnings, including a decline in ne
Slide 56: DPZ Share Price Performance Since Inception
DPZ Share Price Performance Since Inception DPZ’s share price including dividend reinvestment decreased 31% in 2022 through our last share sale on July 25, 2022 DPZ Share Price Performance From 3/8/2021 to 7/25/2022: 1/11/22: DPZ transitions $7.99 $600 national carryout offer to online-only and redu
Slide 57: PSTH Price Performance Since IPO
PSTH Price Performance Since IPO PSTH’s share price increased 2% in 2022 through end of trading on July 25, 2022(3) PSTH Price Performance from 7/21/2020 to 7/25/2022(3): $36 7/21/20: PSTH prices IPO 6/4/21: PSTH confirms 7/19/21: PSTH’s board of at $20.00 per unit. Each $34 discussions to acquire 1
Slide 58: Q&A
Q&A
Slide 59: Additional Disclaimers and Notes to Performance Results
Additional Disclaimers and Notes to Performance Results PSH NAV appreciation is calculated with respect to PSH’s Public Shares. Results are presented on a net-of-fees basis. Net returns include the reinvestment of all dividends, interest, and capital gains from underlying portfolio companies and ass
Slide 60: Additional Disclaimers and Notes to Performance Results
Additional Disclaimers and Notes to Performance Results Share price performance data for a portfolio company reflects the reinvestment of the issuer’s dividends, if any. Share price performance data is provided for illustrative purposes only and is not an indication of actual returns of PSH over the
Slide 61: Additional Disclaimers and Notes to Performance Results
Additional Disclaimers and Notes to Performance Results An investment in PSH will entail substantial risks, including, but not limited to, those listed below, and a prospective investor should carefully consider the following summary of certain risk factors below: Speculative Investment and High Deg
Slide 62: Additional Disclaimers Related to SPARC
Additional Disclaimers Related to SPARC Whether and when a SPARC Distribution may take place remains subject to the SEC review process and effectiveness of an SEC registration statement registering the SPARC Distribution under the Securities Act of 1933. The decision to make the SPARC Distribution a
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