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To the Shareholders of Pershing Square Holdings (OTCPK:PSHZF), Ltd.:
PSH generated strong NAV performance in the first half of 2025 of 15.5% compared with a 6.2% return for the S&P 500 ((SP500), (SPX)) over the same period. 6 PSH’s year-to-date NAV return as of August 19, 2025 was 17.7% compared to 9.9% for the S&P 500 over the same period.
Investors who invested in Pershing Square, L.P. at its inception on January 1, 2004, and transferred their investment to PSH at its inception on December 31, 2012 (“Day One Investors”) have grown their equity investment at a 16.4% compound annual rate over the last nearly 22 years, a 27-times multiple of their original investment, compared with a 10.5% return ( 9times multiple) had they invested in the S&P 500 over the same period.7
Using PSH’s stock price return rather than per-share NAV performance, Day One Investors have earned a 14.4% compounded return, an 18-times multiple of their original investment.8 This lower return reflects the 32.2% discount to NAV at which PSH’s stock currently trades. Our strong preference is for PSH’s shares to trade at or around intrinsic value for which we believe PSH’s NAV per share is a conservative estimate.9
The Year to Date
We have had a highly productive and profitable year to date driven by the continued strong business performance of our portfolio companies, and portfolio repositioning that has mitigated some risk and created opportunities for future profits. While we are generally a long-term holder and don’t typically trade around positions, the large amount of stock price volatility this year – largely associated with tariffs and other geopolitical issues – created significant opportunities to make additions to existing holdings (Brookfield (BN) and Hertz) and make a new investment (Amazon (AMZN)).
The volatility also created opportunities to trim holdings that had reached a disproportionately large size (UMG), that offered lower rates of return at their then near-time high market values (Hilton and Chipotle) or that we chose to exit due to increased risk and uncertainty due to tariffs (Canadian Pacific). Our portfolio activity both mitigated risk as we sold portions of existing positions at prices above their subsequent trading prices and created opportunities for future profits. Our new investment in Amazon, and additions to some of the positions we had trimmed earlier in the year (Alphabet (GOOG) (GOOGL) and Hilton) at materially more attractive valuations when prices dropped after the initial tariff announcement, fall into the latter category.
I mention the above trading activity because it is unusual for Pershing Square as we tend to be a buy and hold investor. The high degree of liquidity of our holdings, combined with stock market volatility, does, however, occasionally create portfolio repositioning opportunities from which we can benefit.
Howard Hughes Holdings (HHH)
We spent the first few months of the year negotiating a transaction for Pershing Square Holdco, L.P., the owner of Pershing Square Capital Management, L.P. (PSCM), to acquire a $900 million, 15% stake in HHH for $100 per share, a 48% premium to the stock’s pre-announcement trading price on May 2, 2025. The purchase was part of a transaction in which I returned to HHH as Executive Chairman and Ryan Israel became CIO. With our addition to the board, Pershing Square affiliates now hold three of eleven seats. As part of the transaction, we have committed to make available the full resources of Pershing Square to the company in exchange for a base and incentive management fee. We are reducing the management fees we receive from PSH dollar for dollar by the proportionate share of fees paid to PSCM by HHH.
Our approach to HHH’s transformation is similar to that of other companies we have owned that have underperformed their potential. In these cases, we make changes to governance and management to improve the company’s long-term prospects. The difference here is that we were already a long-term holder prior to our recent transaction, and the additions to management and the board come from Pershing Square rather than from another company.
HHH has been a long-term holding that has underperformed its potential. Nearly 15 years ago, we backstopped a rights offering for HHH at $50 per share along with Blackstone (BX), Brookfield, and Fairholme (FAIRX), and the stock has appreciated only about 50% over the period.10 We originally created HHH to hold the non-core assets of General Growth Properties (GGP) as part of its emergence from bankruptcy. GGP has been Pershing Square’s most successful portfolio company investment as the stock and spinoffs from the company collectively appreciated from $0.34 at the inception of our purchases to about $35 per share at our exit of GGP, from which the Pershing Square funds made $2.8 billion.11
Nearly 15 years later, we believe HHH is well positioned to create substantial long-term value in the business of owning and developing master planned communities (MPCs) as the company has sold or spun off non-core assets and now owns a focused and highly profitable portfolio of some of the most desirable real estate communities in the U.S. Despite HHH’s high quality assets, excellent management and optimized form, its stock has failed to trade at a price which reflects its intrinsic value and highly attractive future prospects.
We believe that Wall Street has largely ignored HHH because of the complexity of its underlying assets (it can take months for an investor to perform due diligence on the company’s portfolio), and because investors instinctually assign a high cost of capital to a real estate development company with about half of its enterprise value invested in land. Ultimately, we concluded that we could not solve HHH’s cost of capital problem while it remained a pureplay MPC enterprise. We believe that as HHH becomes a more diversified holding company in other higher-returning businesses that require less use of financial leverage, its cost of capital will come down. And as the MPC business becomes a smaller part of the overall enterprise, HHH’s MPC business’ inherent complexity will be a lesser deterrent to investment.
We are working to transform HHH into a modern-day Berkshire Hathaway (BRK.B). We begin with a significant advantage at the inception of its transformation. In contrast to Berkshire’s dying textile operations circa the late 1960s, HHH’s MPC business will begin to generate substantial and growing cash flows that will not be required to be reinvested in its MPCs and can therefore be redeployed into building a diversified holding company. With the addition of our $900 million of capital to the company, HHH can also immediately begin pursuing investments outside of real estate.
Our first initiative is for HHH to acquire a diversified property casualty insurance company whose assets we will manage. A careful analysis of Berkshire Hathaway’s history (I strongly recommend The Complete Financial History of Berkshire Hathaway by Adam Mead) reveals how important Berkshire’s insurance operations have been to the creation of Berkshire’s long-term shareholder value. The benefit of a well-run insurer as an important driver of shareholder value for a diversified holding company is that a profitable insurance operation is inherently a highly cash-generative business. Insurers write premiums and pay claims later which generates float, or to quote Buffett, “money that the insurer holds but does not own.” With the power of compounding, a profitable insurer whose assets are managed intelligently can compound its equity capital at a high rate over the long term without the need to issue common equity to grow.
In contrast to typical insurance companies, Berkshire’s insurance operations have been managed in a low-leveraged fashion. That is, they have written relatively small amounts of premium relative to capital, and the ratio of their invested assets to capital has been lower than for a typical insurer. This low-leverage approach to insurance and investments, plus the additional credit support provided by Berkshire’s diversified holding company structure, has enabled its insurance companies to invest a substantially higher percentage of their assets in common stocks. As a result, Berkshire’s insurance
operations have earned high returns largely because of the higher returns that they have generated on their investment portfolios. This approach compares favorably with nearly all other insurance companies which principally rely on profits from underwriting combined with a higher-leverage fixed income investment strategy to generate attractive returns on equity.
Since HHH’s insurance operations will be part of a diversified holding company owned by an extremely well capitalized 47% owner (15% by Pershing Square Holdco, L.P. and 32% by the Pershing Square funds), we believe that HHH is well positioned to implement a similar approach to Berkshire.12 Our intended approach to acquire and grow an insurance company at HHH should not be confused with that of hedge funds that have acquired or partnered with insurance companies in order to increase fee-paying assets under management or by other alternative investment managers that have acquired life insurers and issued annuities in order to fund leveraged private credit portfolios.
We will be investing the assets of a future HHH insurance subsidiary directly in fixed income securities (principally U.S. Treasurys) and common stocks, not in the Pershing Square funds, and we will be doing so for no consideration. As a result, HHH’s insurance operations will have the benefit of best-in-class investment management without the associated costs, which will give its insurer a significant competitive advantage.
One of the key success factors to Berkshire’s insurance operations has been the fact that there was no dictate from headquarters to write business. Similarly, HHH’s insurer will be under no pressure to write business or to grow. Running a profitable insurance operation requires a willingness to step away from taking on new risks when market conditions are unfavorable. This ‘cycle management’ approach is difficult for standalone publicly traded insurance companies to implement because of pressures from investors and analysts who seek quarterly progress, and similarly challenging when they are owned by private equity investors who are positioning their insurance companies for an eventual sale in a relatively short period of time.
We intend for HHH’s insurance operations to be a permanent holding, and it will not be under pressure to deliver short-term results. Furthermore, we expect that HHH’s future insurance company will generate long-term profits from investing a substantial portion of its assets in a diversified portfolio of common stocks and will therefore be less reliant on growth and profits from underwriting risk than a typical insurer. If HHH can buy and/or build the right insurance operation managed by the right team, its insurer can generate substantial profits on underwriting profitable business and its investment portfolio. That’s when the magic can really happen.
While there is no certainty that we will be able to execute on the above strategy because HHH must first acquire an insurance company or build one from scratch, and it must both operate the insurer effectively and invest its assets well, we are optimistic that it will be able to do so. While HHH won’t overpay, it can afford to pay a full and fair price for an insurer that meets our criteria. Alternatively, we are confident that we can recruit a first-class management team to build an insurance operation from a standing start. We are currently exploring a number of potential transactions.
Our goal for HHH is for it to increase its intrinsic value per share at a high compound rate over the long term. Owning businesses that are self-funding that can reinvest capital at high rates of return are instrumental toward achieving that goal. An insurance company is a good place for HHH to start because we can bring unique value in managing the assets of the insurer for free. We look forward to sharing more on HHH’s insurance strategy at the upcoming HHH annual meeting.
HHH Annual Shareholder Meeting
HHH will be holding its Annual Shareholder Meeting at the Pershing Square Signature Center at 480 West 42nd Street in New York City on September 30th. The meeting will be open to the public with a preference given to HHH shareholders and
Pershing Square investors in the event we run out of space. We will be holding an open question and answer session with shareholders to address questions about HHH, its future insurance operations, and general market and other developments. As HHH is a substantial and long-term core holding of PSH, we wanted to make you aware of the meeting in case you wish to attend. If you would like to attend, we ask that you pre-register. The pre-registration information will be available shortly on the Howard Hughes website at Investor Relations | Howard Hughes Holdings Inc..
Reasons for Optimism
With about a third of the year left, I will put forth some optimism for the balance of the year. It appears that we are closer to a resolution of the wars in Europe and the Middle East, which if achieved will save lives and reduce global risk premia. Inflation appears to have moderated, setting up the prospects for Fed easing in September and the Fall. Incentives in the new tax bill for investment, in particular, 100% bonus depreciation, will likely start to have a significant effect toward the end of the year. The Administration is now focusing its economic policy initiatives on removing Fannie and Freddie from conservatorship (decade-plus holdings of ours) and deregulation, which will be an important driver of the economy. All of the above are occurring at a time when AI is starting to generate productivity gains while driving massive new investment. But a few words of caution. Markets are ebullient. Signs of speculative activity are everywhere. In short, we are heading into a strong economic backdrop, but investment selection will be paramount.
Thank you for your long-term investment in Pershing Square Holdings. We are grateful for your support.
Sincerely,
PORTFOLIO UPDATE13
Performance Attribution
Below are the contributors and detractors to gross performance of the portfolio of the Company for the six-month period ended June 30, 2025 and year-to-date 2025.14
| January 1, 2025 – June 30, 2025 | January 1, 2025 – June 30, 2025 | January 1, 2025 – August 19, 2025 | January 1, 2025 – August 19, 2025 |
|---|---|---|---|
| Uber (UBER) Technologies, Inc. | 5.3 % | Federal National Mortgage Association (OTCQB:FNMA) | 6.1 % |
| Federal National Mortgage Association | 4.8 % | Uber Technologies, Inc. | 5.8 % |
| Universal Music Group (OTCPK:UMGNF) N.V. | 3.7 % | Federal Home Loan Mortgage Corporation (OTCQB:FMCC) | 4.3 % |
| Federal Home Loan Mortgage Corporation | 3.6 % | Brookfield Corporation | 2.2 % |
| Amazon.com, Inc. | 1.7 % | Amazon.com, Inc. | 2.0 % |
| Brookfield Corporation | 1.5 % | Universal Music Group N.V. | 1.7 % |
| Hertz Global Holdings (HTZ), Inc. | 1.3 % | Alphabet Inc (GOOG,GOOGL). | 1.6 % |
| Hilton Worldwide (HLT) Holdings Inc. | 0.6 % | Share Buyback Accretion | 0.8 % |
| Share Buyback Accretion | 0.5 % | Hilton Worldwide Holdings Inc. | 0.7 % |
| Bond Interest Expense | (0.3)% | Hertz Global Holdings, Inc. | 0.6 % |
| Chipotle Mexican Grill (CMG), Inc. | (0.7)% | Bond Interest Expense | (0.5)% |
| Howard Hughes Holdings Inc. | (1.0)% | Nike (NKE), Inc. | (0.6)% |
| Nike, Inc. | (1.3)% | Chipotle Mexican Grill, Inc. | (2.7)% |
| All Other Positions and Other Income/Expense | (0.5)% | All Other Positions and Other Income/Expense | 0.0 % |
| Contributors Less Detractors (Gross Return) | 19.2 % | Contributors Less Detractors (Gross Return) | 22.0 % |
Contributors or detractors to performance of 50 basis points or more are listed above separately, while contributors or detractors to performance of less than 50 basis points are aggregated, except for bond interest expense and share buyback accretion, if any. Past performance is not a guarantee of future results. All investments involve risk, including the loss of principal. Please see accompanying endnotes and disclaimers on pages 51-54.
New Equity Positions:
Amazon
Earlier this year, we initiated a position in Amazon, a company we have long studied and admired. Amazon operates two of the world’s great, category-defining franchises: its Amazon Web Services (AWS) cloud business and its e-commerce retail operations. Both AWS and the company’s retail operations are supported by decades-long secular growth trends, occupy dominant positions in their respective markets, and have significant long-term opportunities for margin expansion. Moreover, despite operating in different industries, both businesses share the core tenets of Amazon’s ethos: a relentless focus on the customer, leveraging scale to be the lowest-cost provider, and continually reinvesting to improve their value proposition.
AWS, which accounts for approximately 60% of Amazon’s total profits, is the leader in the highly concentrated cloud hyperscaler market with over 40% market share. As the first mover in the space, AWS is exceptionally well-positioned to capitalize on the multi-decade shift of IT workloads from on-premise to cloud solutions. Currently, only about 20% of IT workloads are estimated to be hosted in the cloud, a percentage that is expected to steadily increase and eventually invert over time. Similarly, Amazon’s retail business is powered by strong secular growth in e-commerce adoption. In the U.S., for example, e-commerce sales penetration has doubled in the past decade yet still accounts for less than 20% of total retail sales. Within this rapidly expanding market, Amazon holds a leadership position by offering consumers the widest selection, the lowest prices, and the fastest delivery, all enabled by a one-of-a-kind logistics network that fulfills over $700 billion in gross merchandise value annually.
Despite these compelling attributes, concerns about the sustainability of AWS’s AI-driven growth and the impact of tariffs on the retail business weighed on the company’s share price. This allowed us to initiate our position at an attractive valuation of 25 times forward earnings. We believe these concerns underestimate Amazon’s competitive strengths, the resiliency of its business model, and the duration of its growth runway for several reasons.
With respect to the growth of its cloud business, AWS is already a ~$120 billion run-rate revenue business that continues to maintain an annual growth rate in the high-teens. Despite this impressive growth, AWS has been limited by capacity constraints in recent quarters, as customer demand for AI compute has far exceeded the pace at which hyperscalers can bring new supply online. We believe current investments to accelerate the deployment of additional capacity to meet existing demand are an efficient and high-return use of capital. Over time, we expect AI to spur greater cloud adoption and are cautiously optimistic that it will sustain, or potentially even accelerate, AWS’s revenue growth. On the profitability front, while AWS margins face near-term headwinds in 2025 from increased depreciation, we expect them to improve long-term as the business better leverages its upfront AI infrastructure investments.
With respect to the potential impact of tariffs, while the situation remains highly dynamic, the company has seen limited impact on its results to-date. We believe the retail segment can successfully navigate a wide range of outcomes. Compared to the broader retail industry, Amazon’s merchandising mix is not uniquely exposed to tariffs. In fact, with its extremely broad selection of over hundreds of millions of unique SKUs, Amazon is much better equipped than competitors to weather through any substitution effects and product trends that emerge. As we saw during the pandemic, uncertainty drives customers toward reliable and trusted providers. Amazon’s selection, value pricing, convenience and delivery speed have helped the company gain market share through past periods of disruption and we believe they are similarly well positioned through this current period of uncertainty.
Additionally, while tariffs could result in some additional sourcing and fulfillment costs in the near term, we see significant latent headroom for margin expansion in the retail segment. For context, after adjusting for differences in business mix compared to its peers and factoring in its fast-growing, high-margin advertising revenue, we estimate the retail segment’s structural profitability could be nearly double its 5% profit margin in 2024. Moreover, the company is seeing meaningful productivity gains from warehouse automation and its recent initiative to re-architect its transportation network into a more regional fulfillment model. As a proof point, per-unit shipping costs in the most recent quarter were down approximately 5% year-over-year.
Amid broader tariff-related market volatility in April, we were able to react quickly and build a position in Amazon at a deeply discounted valuation for a business of its quality. Although the company’s share price has appreciated meaningfully from our initial purchase, we believe substantial upside remains given its ability to drive a high level of earnings growth for a very long time.
Hertz (“Hertz”)
Late last year, we began accumulating shares in Hertz, a leading car rental company undergoing a turnaround. We believe Hertz’s share price can increase by a multiple of our cost in reasonably likely scenarios, but in light of its financial leverage, the risk of a permanent loss of capital is higher than for our typical core holdings. We acquired our position in Hertz (representing at inception 1.6% of our total assets) at an average cost of $3.81, as the market had discarded Hertz as an unprofitable business burdened by significant financial leverage, with many investors drawing unfavorable comparisons to the company’s bankruptcy during the COVID-19 pandemic when travel was brought to a standstill. 15,16 We believe the new Hertz is poised for a recovery, with a favorable industry backdrop and a management team executing a sound turnaround strategy.
We believe the car rental industry has improved considerably since the pandemic. Following decades of consolidation, the car rental industry now functions as an oligopoly dominated by Enterprise, Avis, and Hertz, which together control ~95% of the market. Pricing discipline has improved since the pandemic as operators keep vehicle supply within the demand curve. The success of privately held Enterprise, which we estimate operates at 20%+ margins through a decentralized model, advantageous business mix, and profitable used car sales, underscores the industry’s potential when managed well.
Under CEO Gil West, Hertz has embarked on an ambitious turnaround by rotating its fleet, increasing unit revenues, and reducing costs. The company has refreshed its fleet substantially, with more than 80% of vehicles now less than a year old. Earlier this year, Hertz secured its 2025 model-year purchases at attractive pre-tariff prices, shielding the business from near-term tariff impacts. The newer fleet has helped Hertz avoid many of the recall issues affecting the broader industry, lower operating expenses, and sustain high utilization rates. Additionally, elevated used car prices, driven in part by tariffs, allowed Hertz to sell older vehicles at favorable values, reducing depreciation per unit per month to $250 this quarter, well below its $300 target. With lower capitalized costs on its newer fleet and a supportive used car pricing environment, Hertz is well positioned to outperform its depreciation goals. As an early sign of the success of the turnaround, the company reported its first profitable quarter since 2023, and we expect the company to report a sizeable profit in the second half of the year.
While the market questioned Hertz’s liquidity position earlier this year, the management team also made significant progress in strengthening the company’s balance sheet. The company now has ample flexibility, with $1.4 billion in liquidity. With ongoing cash generation, we believe Hertz can naturally de-lever and has multiple options to address upcoming maturities towards the end of next year.
Looking ahead, management sees a path to $1 billion in normalized EBITDA in 2027, with continued growth as operations improve. Beyond its core car rental business, Hertz is also well positioned to be a significant player in the autonomous vehicle ecosystem, offering a potential new avenue for growth. The company’s expertise in purchasing, financing, deploying, and maintaining large fleets provide it with a natural advantage as a fleet operator. With a global network of purpose-built locations, trained personnel, and an established EV infrastructure, Hertz has the capability to deploy autonomous vehicles at scale virtually overnight. Given the combination of improving industry structure, sound execution, and significant strategic optionality, we believe Hertz offers an attractive, asymmetric return profile and we remain excited about the company’s future.
While we think it is likely that our investment in Hertz will be successful, we recognize that the company has a significantly higher degree of financial and operational leverage than our typical core investments and, as a result, have a smaller position size that is consistent with how we have historically sized asymmetric investments.
Current Equity Positions17
Uber Technologies (“Uber”)
Uber is the world’s leading mobility and delivery platform, operating a capital-light, highly-scalable, and rapidly-growing business. We initiated our investment earlier this year because we believed Uber’s stock price significantly undervalued the company’s earnings power and growth prospects. We believe the stock was mispriced due to misplaced concerns regarding perceived long-term threats from autonomous vehicles (“AVs”).
In recent months Uber has announced a number of partnerships with various technology players, each advancing their own AV technologies. Recent mobility announcements include new and expanded partnerships with Avride, Baidu, Lucid, May Mobility, Momenta, Nuro, Pony.ai, Wayve, WeRide and others. Taken together, Uber is strategically advancing dozens of geographically focused commercial pilots, with a line-of-sight to tens of thousands of autonomous vehicles covering major metropolitan cities operating on Uber’s network within the coming years. In Austin and Atlanta, Uber exclusively launched Waymo’s commercial operations with its strong preliminary utilization data reinforcing Uber’s strong value proposition. Over time, we believe that additional data will further demonstrate that partnering with Uber allows AV players to scale faster than they could on their own while maximizing the unit economics of their vehicles. Furthermore, Uber’s value proposition is even more compelling for the many small potential entrants who lack the resources, capabilities and network density to attempt a standalone rideshare service.
In addition to Uber’s strategic advances, the company has delivered exceptional financial performance this year, as evidenced by its most recent quarterly results. The company reported an 18% increase in constant-currency booking value driven by a 15% increase in users and a 2% increase in frequency, driving a 18% increase in quarterly trips to 3.4 billion. Trip growth anchored Uber’s 18% constant-currency revenue growth, which, coupled with strong cost control, generated Adjusted EBITDA and GAAP earnings-per-share increases of 35% and 49%, respectively.
In particular, Uber’s Delivery segment (aka Uber Eats) delivered exceptional performance, with 23% constant-currency revenue growth and 48% growth in segment level profits, as the business continues to scale and margins expand closer towards their structural potential. While often overlooked by investors, Delivery comprises nearly 50% of Uber’s total bookings value and is a major source of earnings growth.
Similar to other capital-light business we own, Uber generates substantial excess cash flows, which management intelligently returns to shareholders in the form of a sizable share repurchase program. We believe the company is positioned to repurchase ~4% of its market capitalization this year and is now on a path to permanently reducing outstanding shares. The company recently announced a new $20 billion repurchase authorization, affirming Uber’s commitment to capital return as the primary form of capital allocation for excess cash.
We continue to believe the market underappreciates the durability of Uber’s moat, the magnitude of its earnings growth, and the strategic role it will play in shaping the future of mobility. We anticipate Uber will generate 30% or greater annual earnings per share growth over the medium-term, and it’s likely that over time investors will reward the company with a higher earnings multiple that more appropriately reflects the company’s future growth prospects and competitive positioning as the AV industry structure matures.
Brookfield Corporation (“BN” or “Brookfield”)
Brookfield is a high-quality, asset-rich, rapidly growing business that has a long-term track record of excellent capital allocation. We initiated a position in Brookfield last year as we believed BN’s stock was undervalued in light of its high and
accelerating rate of growth in its earnings per share over the medium term. In recent quarters, the company has advanced several important strategic initiatives which we believe will help the company grow earnings while simultaneously simplifying the business and garnering recognition from investors.
BN continues to make progress growing its important annuity and insurance business (Brookfield Wealth Solutions, or “BWS”), which now manages $135 billion in insurance assets. The company also continues to improve its communication regarding the strategic importance and value of this fast-growing funding source. This quarter, the company announced its intention to refocus BN to an “investment-led insurance organization,” with capital increasingly funded by individual investors’ insurance float. We believe this business evolution remains underappreciated by investors and has strong strategic and financial logic. Critically, Brookfield already manages a $1 trillion portfolio of real assets (including real estate, infrastructure and power), which are ideally suited for annuity capital given their highly contracted cash flows and inflation indexation. Building on this evolution, BWS recently announced the acquisition of Just Group, a U.K. annuity and pension provider. This will increase BWS’s annuity portfolio by ~30% and firmly position Brookfield as a major player in the attractive U.K. market where BN is already one of the largest real estate and infrastructure investors. We believe Brookfield is at the inception of a broader evolution which will drive substantial earnings growth and value creation over the coming years.
External financing and stock market conditions have also turned more favorable in recent months, which has helped BN simplify its real estate business by selling off some of its non-core and opportunistic real estate investments while retaining its high-quality, high cash flow trophy assets. We believe BN will continue to simplify its real estate business in the future, which will be well received by shareholders. Improving market conditions have also allowed Brookfield to achieve significant fund level monetizations, which will help boost the earnings from carried interest over the coming years and provide a significant amount of cash flow for share repurchases and strategic growth investments. We believe the company is poised to realize a step-function change in carried interest generation beginning in 2026.
We estimate Brookfield will grow distributable earnings, which is the company’s metric for earnings per share, at a midteens percentage this year, before significantly accelerating the growth rate to as much as 30% in 2026, as carried interest and BWS both experience a step-function change in their earnings contribution.
The company has also made progress in expanding its potential U.S. investor base by expanding its sell side investment coverage and making progress towards Brookfield Asset Management (BAM) U.S. index inclusion, which may be a potential precursor to similar actions by BN. In recognition of some of this progress, investors have assigned a higher valuation multiple to BN’s earnings over the past year, but the company still trades at a substantial discount to comparable U.S. peers, including KKR (KKR) and Apollo.
We continue to believe Brookfield is an extremely attractive investment, with ~20% compounded growth in cash flows over the medium-term and potential for further earnings multiple expansion.
Universal Music Group (“UMG”)
UMG is the world’s leading music entertainment company and a high-quality, capital-light business that can be best thought of as a rapidly growing royalty on greater global consumption and monetization of music.
The company has now delivered four consecutive quarters of high-single-digit subscription revenue growth, with subscription revenues up 9% in the most recent quarter. Streaming revenues also grew 9%, well above investor expectations, driven by strong performance across ad-supported partners. Importantly, UMG’s strong growth has been primarily driven by subscriber growth and does not yet reflect the benefit of upcoming pricing actions. UMG recently signed
agreements with major digital service providers (“DSPs”) incorporating its “Streaming 2.0” principles, which include higher wholesale rates which will lead to higher like-for-like retail prices as well as new product tiers for superfans. The first indication of higher retail prices emerged earlier this month when Spotify (SPOT) announced price increases in many key markets, a move we expect will extend to additional markets with other DSPs likely to follow.
Over the mid to longer term, we continue to expect UMG to benefit from multiple growth drivers including continued penetration of streaming, price increases, and new product tiers.
We are also encouraged by UMG’s recent hiring of Matt Ellis as its Chief Financial Officer. Ellis brings public company experience, which we believe can help enhance shareholder communication, refine capital allocation, and improve the company’s approach to shareholder returns over time.
In May, Bill stepped down from the Board of UMG due to increasing demands on his time from his other Pershing Square commitments, including his recent appointment as Executive Chairman at Howard Hughes Holdings. We have exercised our rights to request a public offering and U.S. listing which we believe will increase demand from U.S. investors, improve analyst coverage, and potentially enable UMG to be included in major U.S. indices.
We believe that UMG’s continued strong market positioning, long runway for sustained earnings growth, and superb business qualities bode well for the company’s future prospects.
Alphabet (“Google (GOOG, GOOGL)”)
Alphabet, the parent company of Google, is successfully executing on its vast AI potential. The company’s key advantages stemming from industry-leading models, a full-stack approach to technical infrastructure (including proprietary chips), access to high-quality data, rapidly improving product launch velocity and a robust distribution ecosystem of seven different apps with over two billion users each – are beginning to meaningfully widen Google’s moat and competitive differentiation in AI.
In its core Search product, the company’s AI leadership is most evident in its broad roll-out of AI-powered summary responses, called “AI Overviews”. AI Overviews are now being served to more than two billion users across 200 countries, making it the most widely used consumer AI product. AI Overviews are resulting in users asking more detailed questions, clicking through at higher rates and searching with greater frequency. On the back of AI Overviews’ success, the company has also introduced “AI Mode”, which more closely resembles a chat-like user experience, directly onto the Search page.
Beyond core Search integrations, the company is also having tremendous success across its broader consumer app portfolio. YouTube continues to lead streaming watch time in the U.S., with AI driving meaningful improvements to its recommendation algorithm, auto-dubbing and content creation tools. Google’s state-of-the-art video generation model, Veo3, has been a viral hit with over 70 million videos created since its launch in May. Last month, the company also introduced new agentic capabilities with AI-powered calling to local businesses to make appointments and reservations. This is a feature Google is uniquely positioned to deliver by integrating its Search, Maps, Calendar, and Gmail services for a user.
Google’s Cloud segment, a $50 billion run-rate revenue business growing at a 30%-plus rate, is also seeing its AI capabilities accelerate product differentiation. The company signed the same number of over $1 billion deals in the first half of 2025 that they did throughout all of 2024. With increasing scale, the Cloud segment has inflected from breakeven profitability in 2023 (when we initiated our position) to a 21% profit margin in the most recent quarter, with line of sight to achieving the greater than 30% profit margins enjoyed by peers.
Despite tremendous business momentum, Alphabet still trades at a discounted valuation for a business of its quality and growth prospects, partially driven by investor concerns around an upcoming antitrust ruling. As a reminder, a federal court ruled against Google in the DOJ’s antitrust case on default search agreements last August. A trial to determine remedies in that case concluded earlier in the year and a final ruling on remedies is expected in the near-term. We believe the company is well-positioned to navigate a range of outcomes including potential remedies which involve a choice screen implementation, for which there is strong precedent from EU antitrust enforcement. Google will also most likely appeal the remedy ruling. We continue to closely monitor the case and expect further clarity shortly.
Fannie Mae (OTCQB:FNMA) (“Fannie”) and Freddie Mac (OTCQB:FMCC) (“Freddie”)
Since our last update in the 2024 Annual Report, President Trump has demonstrated clear focus on the privatization of Fannie and Freddie. In May, President Trump stated that he was “giving very serious consideration to bringing Fannie Mae and Freddie Mac public,” and that he would be discussing the matter with the relevant parties in his administration. Several days later, the President clarified that “the U.S. Government will keep its implicit GUARANTEES,” which is consistent with an administrative exit from conservatorship that would be fully within the President’s executive authority.
On July 31st, press reports indicated that President Trump was asking bank CEOs for their pitches on monetizing Fannie and Freddie, which was followed by August 8th reports that the administration was preparing to sell between 5% and 15% of Treasury’s stock in the companies at a combined valuation of roughly $500 billion by the end of this year. President Trump seemed to endorse the latter article by posting an AI image of himself at the New York Stock Exchange to ring in the listing of “The Great American Mortgage Corporation,” dated November 2025.
We believe the relevant parties in the administration are laser-focused on executing the President’s vision. Treasury Secretary Scott Bessent’s prior statements that Fannie and Freddie would be a key focus after tariffs and tax reform have proven prescient. Secretary Bessent has floated the idea of creating a U.S. sovereign wealth fund with Treasury’s ownership stakes in Fannie and Freddie as anchor assets, which we believe would be an ideal way for the government to maintain its ownership in and realize substantial value from the companies over time. At FHFA, Fannie and Freddie’s regulator, Director Bill Pulte has moved quickly to instill a private-sector mindset, including by bringing staff back to the office, beginning to rationalize costs at the companies, and making changes to the boards of directors and management teams.
We believe that Fannie and Freddie common shares will be worth a multiple of current prices if an exit from conservatorship is achieved consistent with the framework that we have previously articulated.
Restaurant Brands (QSR) International (“QSR”)
QSR’s franchised business model is a high-quality, capital-light, growing annuity that generates high-margin brand royalty fees from its four leading brands: Tim Hortons, Burger King, Popeyes, and Firehouse Subs.
The company’s two largest profit drivers, Tim Hortons and Burger King International, which together account for roughly 70% of profits, continue to perform well and lead QSR’s growth. At Tim Hortons, same-store sales increased 4% in the most recent quarter, marking the 17th consecutive quarter of positive same-store sales growth, which was driven by balanced growth in both higher traffic and average check. We believe Tim Hortons can continue its strong growth by expanding its presence in the food category and by growing its cold beverage business. Burger King International also delivered impressive results, with same-store sales up 4%, outperforming McDonald’s (MCD) in current momentum and cumulatively since the pandemic. We expect Burger King’s localized menu innovation, targeted value promotions, and ongoing digital adoption to continue to drive strong results.
In the U.S., Burger King continues to make progress in modernizing the system and returning the business to sustainable growth. The recently acquired Carrols restaurants grew same-store sales by nearly 3%, outpacing the broader system and showcasing the early benefits of remodels and improved operations. The company has already begun refranchising efforts and is actively signing candidates for its “Crown Your Career” program, which supports high-potential internal talent becoming franchise owners. We expect the company’s multi-year efforts to remodel its restaurants and improve operations should continue to drive sales momentum.
Despite these strong results at its largest brands, QSR currently trades at less than 17 times our estimate of forward earnings, which is more than a 30% discount to peers with comparable long-term earnings growth potential. With a strong operating model, improving financial performance, and a deeply discounted valuation, we see meaningful upside potential and remain confident in the company’s long-term growth trajectory.
Howard Hughes Holdings (“HHH”)
On May 5, 2025, Pershing Square invested $900 million to acquire 9 million newly issued shares of HHH. Taken together with the Pershing Square Funds’ ownership, Pershing Square now owns 47% of HHH shares outstanding in total. Pershing Square’s investment will enable HHH to become a diversified holding company by acquiring controlling stakes in highquality, durable growth public and private operating companies while continuing to invest in and grow the company’s core real estate operations.
As part of the transaction, HHH has entered into a services agreement under which Pershing Square will support the company’s transformation by providing investment, advisory, and other ancillary services, including corporate development, transaction execution, and capital markets assistance. Pershing Square will also assist HHH in identifying and hedging macro-related risks. Bill has been named the Executive Chairman of the HHH Board of Directors. Ryan Israel, Pershing Square’s Chief Investment Officer, has been named HHH’s Chief Investment Officer, a new senior leadership role at the company.
In exchange for services rendered, PSCM will receive a quarterly base fee of $3.75 million and a quarterly management fee equal to 0.375% of the increase in HHH’s equity market capitalization over a reference market cap of the company. The reference market cap is fixed to the company’s share count at transaction close and is adjusted annually for inflation. Therefore, share issuances will not increase the management fee. It will only increase if the company’s share price compounds at a rate in excess of inflation. PSH’s management fees will be reduced by an amount equal to the fees that PSCM earns on the HHH shares held by PSH, dollar for dollar. While the HHH-related fee reduction to PSH will not be material initially, we expect the reduction to scale meaningfully over time as HHH’s share price appreciates to more accurately reflect its intrinsic value.
As discussed on HHH’s most recent earnings call, we believe property and casualty (“P&C”) insurance is an ideal business platform to begin HHH’s transition to a diversified holding company. The cash generative nature and industry structure of P&C insurance allow for rapid growth and provide a significant source of investment funds for HHH. An insurance business will also be able to leverage Pershing Square’s investment’s expertise to invest its asset portfolio for no additional fees, which we believe will drive substantially higher returns on equity than a typical P&C insurer. HHH’s holding company structure is another major competitive advantage. We expect HHH’s capital support will materially strengthen an insurance subsidiary’s credit profile and underwriting flexibility. Moreover, an insurance business will benefit from a second layer of capital support by virtue of HHH Itself having a well-capitalized 47% owner in Pershing Square, who has a long-term demonstrated track record of providing capital support to the company. We are actively evaluating several potential P&C insurance acquisition opportunities and intend to give an update on our progress at HHH’s Annual General Meeting on September 30 in New York City.
Meanwhile, HHH’s core real estate business continues to deliver solid performance led by notable strength in land sales. The company generated land sale profits of $102 million last quarter and the company raised guidance for full-year 2025 MPC land sale profits to approximately $430 million, representing 23% growth. Despite a challenging backdrop for the national housing market, HHH continues to see robust demand from homebuilders for its highly desirable collection of master planned communities (“MPCs”). The average price per acre for residential land sold last quarter was $1.35 million, supported by a mix shift towards higher-priced lots in the company’s Summerlin MPC. In its portfolio of income-producing operating assets, net operating income grew 7% in the first half of 2025, on a same-store basis, driven by strong leasing momentum in office and multi-family assets. In its Ward Village condominium development in Hawaii, HHH continues to experience robust sales momentum. In late June, the company launched pre-sales for Melia and ‘Ilima, their latest front-row, luxury condo developments, noting exceptional early demand.
Nike (“NIKE”)
NIKE is in the early stages of a turnaround under new CEO Elliott Hill. In the ten months since rejoining the company, Hill has moved with urgency, replacing 12 out of his 15 direct reports and resetting the culture and organizational structure with a renewed focus on sport. Hill’s “Win Now” strategy targets a return to profitable growth by accelerating product innovation, creating distinctive marketing, and rebuilding wholesale distribution, while right-sizing inventory levels across certain product lines and sales channels following several years of overreliance on direct-to-consumer and lifestyle footwear. While a full turnaround will take time, we are beginning to see encouraging signs of progress.
In the most recent quarter, NIKE delivered results and guidance ahead of expectations. Revenue declined by 11% on a currency-neutral basis as aggressive inventory liquidation and elevated wholesale discounts weighed on results. However, momentum is building in sports performance, with running revenue growing by high-single-digits powered by new franchises such as the Vomero18. Other near-term priorities include training with the Metcon shoe and 24/7 apparel collection, soccer with the upcoming 2026 World Cup in North America, and basketball with a Caitlin Clark signature shoe expected to be launched in spring 2026. Wholesale partners are excited about the newness, with holiday 2025 order books up year-over-year, supporting better-than-expected guidance for the current quarter of a mid-single-digit revenue decline. Management believes clearing excess inventory by the end of 2025 will allow NIKE’s order book and revenue growth to better align, enabling a return to growth in 2026.
While Nike’s margins are currently depressed due to intentional actions taken to effectuate the turnaround, we believe the company can return to historical levels of profitability over the next several years. In addition to gross margins improving as inventory clearance actions abate, there is a substantial opportunity to rationalize overhead costs built up under prior management, including in technology, direct-to-consumer infrastructure, and supply chain. Although tariffs represent a more than $1 billion cost headwind, management intends to fully mitigate the impact over time through sourcing changes, sharing costs with suppliers and retail partners, selective price increases, and corporate cost reductions.
We are confident that Nike’s obsessive focus on sport under best-in-class leadership will reignite brand momentum and enable the company to achieve its decades-long track record of high-single-digit revenue growth and low-to-mid teens margins.
Chipotle (“CMG”)
Chipotle’s performance fell short of its long-term potential in the first half of 2025 as an uncertain consumer environment and difficult comparisons impacted results. Management cut full year 2025 guidance for the second time on the second quarter call in July, from low-single-digit growth to approximately flat same-store sales. While some of this same-store sales weakness is clearly due to overall soft consumer spending in restaurants as evident in the performance of competitor
brands, the onus is on management to adapt to the current environment and better communicate Chipotle’s phenomenal customer value proposition. We fully expect Chipotle to return to its historical growth trajectory once execution improves and macro headwinds moderate.
Same-store sales declined 4% in the second quarter, reflecting a challenging 11% prior-year comparison and softer traffic from lower-income customers. Management attributed the weakness to volatile consumer confidence and believes that some traffic was lost to quick service brands offering price-point-based promotions. Despite the sales pressure, restaurantlevel margin and operating income exceeded expectations due to supply chain efficiencies and improved in-restaurant execution.
Management is responding to the sales slowdown by increasing marketing spend, introducing new menu items, and speeding up operations. Chipotle’s new summer marketing campaign, including social media advertising and a seasonal program for rewards members, is driving incremental transactions during a seasonally slow period for the brand. Chipotle Honey Chicken, which is included in one out of every four orders, and Adobo Ranch, the company’s first new dip in five years, are also helping traffic. In the back of house, Chipotle is rolling out new produce slicers and a high-efficiency equipment package across the system to improve labor efficiency. Early results from these initiatives are promising, with comparable sales turning positive beginning in June and continuing into July.
While the near-term backdrop is uncertain, we believe Chipotle remains one of the most attractive concepts in the restaurant industry, offering fresh, affordable, and customizable meals, with best-in-class unit economics and a long runway for U.S. and international growth. The company is on track to grow units by 9% in 2025 and remains committed to opening at least 7,000 locations in North America over time. Chipotle is also in the early innings of international expansion through scaling its company-owned restaurant business in Europe and franchising in the Middle East and Mexico. Untapped opportunities include introducing new dayparts such as breakfast and deploying automation technologies to streamline operations and enhance the customer experience.
Hilton
Hilton continued to deliver strong growth during the first half of 2025 amid a relatively slower macroeconomic environment, once again demonstrating the unique advantages and durability of Hilton’s high-quality, asset-light, highmargin business model. In the second quarter, Hilton delivered 15% earnings per share growth despite revenue per available room (“RevPAR”) modestly declining by 0.5%, reflecting some softness in U.S. travel trends.
While near-term domestic RevPAR trends have been tepid, management noted some encouraging signs of improvement in business transient and group bookings, which could provide upside in 2026 as RevPAR growth normalizes. Over the longterm, we expect annual RevPAR growth to be close to a 2% to 3% rate.
Hilton expects full-year net unit growth solidly within its 6% to 7% target range, increasingly supported by hotel conversions, which are expected to represent approximately 40% of system growth this year. Signings and construction starts also remain robust, both up double digits year-over-year, reflecting the continued global demand for Hilton-branded properties.
Beyond Hilton’s best-in-class net unit growth, strong capital return continues to be a defining feature of Hilton’s return algorithm. The company raised $1 billion of debt earlier this year to support its capital return program (Hilton periodically raises debt to hold its leverage ratio constant on a growing base of earnings) and is on-target to return more than $3 billion of capital this year, or 5% of its market capitalization. Combined with Hilton’s consistent cost discipline and high incremental margins, the company’s stellar capital allocation supports robust earnings growth and per-share value compounding for years to come.
We continue to view Hilton as an incredible business that offers a unique combination of predictability, resiliency and capital light growth. With its best-in-class leadership team, clear strategic vision, and robust growth runway, Hilton remains well positioned to deliver sustained value to shareholders in the years ahead.
Exited Equity Positions:
Canadian Pacific Kansas City (CP) (“Canadian Pacific”)
As we previously disclosed, in April 2025, we exited our investment in Canadian Pacific.
