Letter to Shareholders in the 2023 Annual Report

Pershing Square Holdings delivered 26.7% NAV performance in 2023, in line with the S&P 500's 26.3% return, extending a 20-year track record of 16.5% compounded annual gains. Ackman attributed outperformance to competitive advantages rooted in permanent capital, concentrated portfolio strategy, and a small 40-person team that attracts top talent. The firm added Alphabet to its portfolio and exited Lowe's, maintaining its long-term ownership discipline. Ackman emphasized that hedging and asymmetric investments have been substantial return contributors, though 2023 hedges generated 187 basis points of losses—principally from energy and Japanese interest-rate swaptions—offset by gains on USD interest-rate instruments. The firm's hedging program enabled it to remain fully invested during market turmoil and generated $2.6 billion in proceeds from a $27 million COVID-19 credit-default-swap investment in March 2020, which was redeployed at market lows. In February 2024, Pershing Square announced amendments to its investment management agreement that will reduce its 16% performance fee by including 20% of management fees earned from non-PSH Pershing Square funds investing in public securities without performance fees. The firm also announced plans to launch Pershing Square USA, a U.S. closed-ended fund mirroring PSH's strategy, with a long-term goal of reducing PSH's performance fees to zero. Ackman highlighted portfolio company CEOs including Brian Niccol of Chipotle, whose stock has risen more than 10-fold since his March 2018 appointment, and Sundar Pichai of Alphabet, under whom the company's revenue, earnings, and market value have grown substantially. Day One Investors have multiplied their equity investment by 22 times over 20 years versus seven times for an S&P 500 index fund.