Pershing Square: Deutsche Numis upgrades FTSE 100 trust
Deutsche Numis has upgraded FTSE 100 trust Pershing Square, run by infamous hedge fund manager Bill Ackman, to a ‘buy’.
In a research note, analysts upgraded three trusts to a ‘buy’: £8.1bn Pershing Square, £273.5m Aurora UK Alpha and £436.9m Schroder Asian Total Return.
“Pershing Square benefits from a manager with a strong long-term track record, including impressive returns in market stress,” said Deutsche Numis analysts.
The FTSE 100 trust has a concentrated portfolio of only between eight and 12 holdings, which the analysts said “will look nothing like the benchmark”.
Pershing Square focuses on high quality businesses which generate predictable cash-flows such as royalties on the growth of various industries, including food brands like Chipotle and AI-focused picks like Alphabet.
Other holdings in the portfolio include alternative asset manager Brookfield and Hilton.
Pershing Square currently trades at a 33 per cent discount to the value of its underlying assets, which the analysts described as “unjustified given the performance,” adding that this may narrow if the manager completes the launch of additional funds.
In August, Ackman withdrew his plans to float Pershing Square on US markets after the plans failed to attract investor interest.
While the FTSE 100 trust has traditionally been run solely by Ackman, it has since built a wider investment team led by CIO Ryan Israel, leaving it less reliant on the hedge fund boss.
Pershing Square’s stock price has fallen six per cent in the last year, but is up 220 per cent in the last five years.
The upgrade for Pershing Square comes a week after it raked in more than $1.4bn from the sale of a roughly 2.7 per cent stake in Universal Music.
The sale of the stake brought Universal Music’s position in the portfolio down from 24 per cent to 17 per cent, remaining as its largest position.
Meanwhile, Aurora UK Alpha was awarded a ‘buy’ rating by Deutsche Numis after the trust took over a £123.7m Artemis trust at the end of last year.
“Aurora UK Alpha has a distinct, long-term, value-oriented approach, using in-depth research to build a highly concentrated portfolio focused on businesses where the manager can see visible drivers of return, that are often misunderstood by the market,” said the analysts.
Finally, Schroders’ Asian Total Return trust was given a ‘buy’, with the analysts noting its “relatively tight” four per cent discount, as well as its low volatility.
The Deutsche Numis analysts also added Templeton Emerging Markets, European Assets, and Baillie Gifford Shin Nippon to their list of ‘trading opportunities’, citing their 13 per cent share price discounts to underlying assets.