WEBVTT - Funny Business Is My Business: PRIV, HHH, WARS 0:00:02.720 --> 0:00:07.200 Bloomberg Audio Studios, Podcasts, radio News. 0:00:08.920 --> 0:00:10.760 It's been two weeks since they've heard. 0:00:10.520 --> 0:00:12.840 Our scratchy voices. 0:00:13.000 --> 0:00:14.600 Yeah, I sound pretty good. 0:00:14.720 --> 0:00:16.640 You do sound pretty good. Yeah, I probably sound most 0:00:16.800 --> 0:00:18.120 like myself. But I have been sick. 0:00:18.400 --> 0:00:20.759 Yeah, you also got a haircut. Not that that matters. 0:00:20.920 --> 0:00:23.960 No, it's an audio podcast. But no. We took last 0:00:24.000 --> 0:00:27.000 week off because I was taking my children to a 0:00:27.040 --> 0:00:30.480 water park. But also I got extremely sick, and so 0:00:30.680 --> 0:00:33.599 I couldn't have recorded anyway. I lost my voice. I 0:00:33.680 --> 0:00:36.520 was like standing at the water park very quietly saying 0:00:36.760 --> 0:00:37.559 don't go in there. 0:00:38.440 --> 0:00:42.559 So really it was in the listener's best interests, was 0:00:42.600 --> 0:00:44.880 it ever, Yeah, so that they didn't have to hear 0:00:44.920 --> 0:00:47.800 that voice. But we're back now, and boy, we have 0:00:48.240 --> 0:00:51.600 some stuff to talk about. 0:00:52.520 --> 0:00:56.760 I'm convincing. Hello, and welcome to the Money Stuff Podcast. 0:00:56.840 --> 0:00:59.400 You're a weekly podcast wherever you talk about stuff related 0:00:59.440 --> 0:01:03.240 to money. I'm Matt Levine and I write the Money 0:01:03.240 --> 0:01:04.720 Stuff column for Bloomberg Opinion. 0:01:04.920 --> 0:01:07.440 And I'm Katie Greifeld, a reporter for Bloomberg News and 0:01:07.480 --> 0:01:09.000 an anchor for Bloomberg Television. 0:01:09.600 --> 0:01:12.039 What is all this stuff we have to talk about today? Katie? 0:01:12.200 --> 0:01:15.720 Okay, We're coming in hot because the first ever private 0:01:15.760 --> 0:01:18.880 crediting TF has finally launched. We're going to talk about 0:01:18.959 --> 0:01:21.760 Bill Ackman's dreams of being a baby Berkshire, and then 0:01:21.800 --> 0:01:25.080 we're going to talk about info Wars and an interesting 0:01:25.120 --> 0:01:26.440 bid to try and buy it. 0:01:29.440 --> 0:01:31.039 Private CREDITYTF, the. 0:01:31.120 --> 0:01:36.039 Sp D r SSGA, Apollo IG Private Credit ETF. It 0:01:36.120 --> 0:01:41.320 launched on Thursday. Yes, and I have to say, I'm 0:01:41.400 --> 0:01:42.880 kind of shocked that this launched. 0:01:43.840 --> 0:01:45.679 You didn't he do it? And we've talked about this 0:01:45.760 --> 0:01:48.320 like more than fifteen times on the show. 0:01:48.840 --> 0:01:51.920 Yeah, And and a lot of people in the industry 0:01:51.920 --> 0:01:54.560 too are shocked that it launched. Interesting, it feels like that. 0:01:54.760 --> 0:01:57.160 I feel like, is this partly like when they filed 0:01:57.200 --> 0:01:59.000 for it, it was like there are rules and now 0:01:59.000 --> 0:02:01.080 there are no rules. Ors not related to that at all. 0:02:01.240 --> 0:02:02.880 So I was thinking about that. You know, we are 0:02:02.880 --> 0:02:04.840 in a brave new world. We have a new SEC. 0:02:05.560 --> 0:02:08.120 This was filed in September twenty twenty four. It's launching 0:02:08.240 --> 0:02:12.120 February twenty seventh, twenty twenty five. I mean they didn't 0:02:12.120 --> 0:02:14.959 make arguments. I don't think that Apollo and State Street 0:02:15.560 --> 0:02:17.840 didn't put any meaningful thought into. 0:02:17.639 --> 0:02:19.880 This, but I have no problem, Like I'm not surprised 0:02:19.880 --> 0:02:23.080 that it launched. I tell me why, because like you 0:02:23.080 --> 0:02:25.280 could do anything, Man, it's an ETF, Like why not? 0:02:25.360 --> 0:02:28.240 Like, what's what if this launched in twenty twenty four? 0:02:28.280 --> 0:02:29.400 Would you have been surprised? 0:02:30.760 --> 0:02:32.880 No? I asked about like now that we have no 0:02:33.040 --> 0:02:34.640 rules as that would make it, But like I would 0:02:34.639 --> 0:02:36.560 have thought it was fine in twenty twenty four, which 0:02:36.600 --> 0:02:37.560 is probably why they filed it. 0:02:38.080 --> 0:02:41.639 So there's a lot of question marks about and we've 0:02:41.680 --> 0:02:44.919 talked about this too, like how you put securities as 0:02:44.919 --> 0:02:48.760 a liquid as private credit into a very public wrapper, 0:02:48.960 --> 0:02:52.040 what withdrawals look like, and whether you could run into 0:02:52.040 --> 0:02:55.480 some problems there. There's rules that more than fifteen percent 0:02:55.560 --> 0:02:58.440 of an open ended fund can't be in a liquid securities. 0:02:59.200 --> 0:03:02.520 Private credit oly is considered in a liquid security. But 0:03:02.560 --> 0:03:05.919 the CTF is going to invest ten to thirty five 0:03:05.960 --> 0:03:10.320 percent of its holdings in private credit. And the argument 0:03:10.520 --> 0:03:14.160 that State Street and Apollo made was basically that you know, 0:03:14.200 --> 0:03:17.080 Apollo is going to provide that liquidity. They have this 0:03:17.160 --> 0:03:21.080 trading desk, They're going to both supply the private credit 0:03:21.160 --> 0:03:23.960 assets for this fund, and they're also going to buy 0:03:24.000 --> 0:03:28.680 them back. They're contractually obligated to buy them back. So 0:03:29.760 --> 0:03:33.120 it seems like the SEC agreed with that argument because 0:03:33.160 --> 0:03:34.000 this thing is trading. 0:03:36.040 --> 0:03:39.720 I think that argument is basically correct. Right. There's a 0:03:39.800 --> 0:03:41.880 range of stuff that is quote private credit, right, and 0:03:41.880 --> 0:03:44.520 like one thing that is private credit is business development companies, 0:03:44.520 --> 0:03:47.720 which are you know, often like middle market direct lending 0:03:48.360 --> 0:03:51.480 companies that are private credit companies in a public wrapper, right, 0:03:51.480 --> 0:03:56.080 like they provide non bank privately negotiated loans to companies, 0:03:56.080 --> 0:03:59.040 but like they're provided out of a public buol of capital. 0:03:59.240 --> 0:04:01.160 So im I understanding is there's some ability to put 0:04:01.200 --> 0:04:05.400 like BBC shares into this thing, which is liquid private credit, 0:04:05.440 --> 0:04:07.880 no problem. Some large percentage of what they're going to 0:04:07.880 --> 0:04:10.720 do is like Apollo private credit loans that like Apollo 0:04:10.760 --> 0:04:13.040 will make a market in and they will be able 0:04:13.080 --> 0:04:15.720 to trade with apollow at that market. And yeah, it's 0:04:15.720 --> 0:04:17.880 like solves the problem, right, because like the problem is, 0:04:18.480 --> 0:04:22.200 you know, you have the possibility of the fund expanding 0:04:22.240 --> 0:04:25.279 and contracting each day because like if more public buyers 0:04:25.320 --> 0:04:28.200 want to buy, then it'll have to expend. And if 0:04:28.200 --> 0:04:31.040 you have a very i liquid, hard to source, hard 0:04:31.080 --> 0:04:34.799 to sell asset, like we've talked about like private companies 0:04:34.920 --> 0:04:36.599 where it's like, you know, you can only get so 0:04:36.600 --> 0:04:39.039 many SpaceX shares. If you have that, it's hard to 0:04:39.080 --> 0:04:43.640 expand and contract. But like if you have Apollo, which 0:04:43.680 --> 0:04:47.360 has a massive supply of private credit and like you know, 0:04:47.400 --> 0:04:49.600 its own balance sheet and its ability to buy some back, 0:04:50.120 --> 0:04:53.360 then like Apollo can be the like accordion for the 0:04:53.560 --> 0:04:57.280 expanding and contracting of the ETF. And it seems fun. 0:04:57.480 --> 0:04:58.040 What's wrong with that? 0:04:58.279 --> 0:05:01.479 Well, let me read you something from morning Star analyst 0:05:01.560 --> 0:05:05.160 Brian Moriarity, and I will note that morning Star tends 0:05:05.200 --> 0:05:07.760 not to like things that are a little too crazy, 0:05:07.800 --> 0:05:08.840 like they hate what's going on. 0:05:08.839 --> 0:05:10.280 I love things that are a little too crazy. That's 0:05:10.320 --> 0:05:10.920 the problem right here. 0:05:10.960 --> 0:05:14.240 I'm like, oh yeah, they are very spiritually opposed to 0:05:14.760 --> 0:05:18.240 you know, funny business. But this is what moriogy business. 0:05:17.920 --> 0:05:18.760 Is, My whole business. 0:05:18.920 --> 0:05:22.440 Moriarity, I had to say, Apollo's liquidity facility is subject 0:05:22.480 --> 0:05:25.560 to a daily limit, and this daily limit remains undefined. 0:05:25.920 --> 0:05:29.360 It's possible the fund could have to meet way more 0:05:29.360 --> 0:05:32.359 redemptions in a day than the limit. That could force 0:05:32.520 --> 0:05:36.359 State Street to sell more liquid public securities first, potentially 0:05:36.480 --> 0:05:39.600 leaving the ETF with more liquid private credit instruments as 0:05:39.600 --> 0:05:42.880 a percentage of assets, and increasing the risks of a 0:05:42.960 --> 0:05:47.359 liquidity crunch. Okay, wait, I like this line. When this happens, 0:05:47.720 --> 0:05:50.680 the portfolio often begins to manage the advisor rather than 0:05:50.680 --> 0:05:51.520 the other way around. 0:05:51.720 --> 0:05:54.359 Okay, that's a cool line. I agree with that. I 0:05:54.360 --> 0:05:56.480 think it's like when they start with like zero dollars 0:05:56.520 --> 0:05:59.280 of assets, like it's not irrelevant consideration, right, Like, this 0:05:59.360 --> 0:06:01.880 is clearly like they're gonna see where it goes. Apollo's 0:06:01.920 --> 0:06:04.760 trading desk has some risk limit, and like that risk 0:06:04.800 --> 0:06:08.080 limit is more than adequate to deal with redemptions on 0:06:08.120 --> 0:06:12.240 the first day when it will clearly be net creating, right, Like, 0:06:12.240 --> 0:06:14.200 they're not gonna have net redemptions for. 0:06:15.120 --> 0:06:18.000 Two weeks, right, I suppose. 0:06:17.839 --> 0:06:20.000 Like if they had net redemptions in the next two weeks, 0:06:20.000 --> 0:06:23.479 they would be very small because it's all fun. But right, 0:06:23.760 --> 0:06:30.000 if this becomes a twenty billion dollar ETF, then there 0:06:30.000 --> 0:06:32.919 will be material risks of Apollo not being able to 0:06:33.680 --> 0:06:36.960 absorb all of the private credit if it goes from 0:06:37.000 --> 0:06:41.120 twenty billion to zero overnight. Yeah, my assumption is that 0:06:41.160 --> 0:06:42.640 everyone's like, Wow, that'll be a nice problem to have 0:06:42.640 --> 0:06:44.440 when we come to it, right, Yeah, but no, I 0:06:44.440 --> 0:06:47.760 think it like a modest size. It's like, yeah, this 0:06:47.839 --> 0:06:50.360 is a fun proof of concept for Apollo, and they 0:06:50.360 --> 0:06:53.440 would trade the paper. They also get to make the 0:06:53.440 --> 0:06:56.560 price in a not competitive environment, right, like in a 0:06:56.640 --> 0:07:01.160 world where Apollo thinks we're doing rate private credit loans 0:07:01.200 --> 0:07:04.520 and all of our loans are fantastic and like retail 0:07:04.560 --> 0:07:10.160 shareholders of the ETF are pulling out, then for Apollo 0:07:10.320 --> 0:07:13.200 to be like the Marcus sixty cents on the dollar, 0:07:13.200 --> 0:07:15.240 will buy as much as you want, it seems fine 0:07:15.280 --> 0:07:16.360 for them. I don't know. 0:07:16.720 --> 0:07:21.880 Yeah, well, there's skepticism that I've seen the fact that okay, 0:07:21.920 --> 0:07:24.760 Apollo is supplying the private credit and it's also contractually 0:07:24.840 --> 0:07:27.800 obligated to buy it back. I did see some people 0:07:27.920 --> 0:07:30.720 comparing this to like the fox guarding the Henhouse. 0:07:31.200 --> 0:07:33.600 One thing that I think, Yeah, I think they're creating 0:07:33.600 --> 0:07:35.520 private credit to sell to the public and they're trying 0:07:35.520 --> 0:07:37.840 to make money on it, like of course, well, also, 0:07:38.040 --> 0:07:38.800 where do you think they're. 0:07:38.640 --> 0:07:41.080 Doing In the filing, it also says to sort of 0:07:41.520 --> 0:07:44.200 I don't know, ease that worry. The ability to sell 0:07:44.200 --> 0:07:47.400 the instruments to Apollo is not exclusive. So if State 0:07:47.440 --> 0:07:50.360 Street the right find another bid, Yeah, they found a 0:07:50.360 --> 0:07:53.800 better bid somewhere else, they wouldn't have to necessarily sell. 0:07:53.640 --> 0:07:56.040 To a sure great Yeah No, I mean look, I 0:07:56.040 --> 0:07:58.480 mean like when we've talked about not only the content 0:07:58.560 --> 0:08:01.280 of the ECF, right, Like, Apollo is trying to build 0:08:01.320 --> 0:08:04.280 up a market for private credit, right, and I think 0:08:04.320 --> 0:08:07.560 they'd be thrilled to live in a world where once 0:08:07.600 --> 0:08:10.120 State Street wants to sell it's private credit, it can 0:08:10.160 --> 0:08:13.360 get bids from twenty anonymous firms on an electronic platform, right, 0:08:13.400 --> 0:08:15.440 Like that's that's a good world for a private credit 0:08:15.440 --> 0:08:18.760 originator to live in. But yeah, like they think they 0:08:18.800 --> 0:08:21.320 are smart evaluators of private credit and this is a 0:08:21.440 --> 0:08:25.000 like retail place into which to put it, Like yeah, yeah, 0:08:25.200 --> 0:08:27.400 they're hoping to make money. The thing I say is 0:08:27.400 --> 0:08:30.160 like on this liquidity worry, The thing I always write 0:08:30.160 --> 0:08:33.000 about private credit is that it's a really good funding 0:08:33.040 --> 0:08:36.360 model for loans. Right, Like you are Apollo. You raise 0:08:36.400 --> 0:08:39.679 money from like classically insurance companies are like you know, 0:08:39.720 --> 0:08:42.280 in policy case, they own ans, they are an insurance company. Right, 0:08:42.600 --> 0:08:45.720 You raise money from insurance companies and you have this 0:08:45.840 --> 0:08:47.839 very like long term locked up capital and you use 0:08:47.880 --> 0:08:51.679 it to make long term, somewhat risky loans that don't trade, right, 0:08:52.160 --> 0:08:55.840 And that's a good match of liabilities and assets, right, 0:08:55.880 --> 0:08:58.040 Like you are raising long term money to make long 0:08:58.120 --> 0:09:00.559 term loans, it's a better match of liability and assets 0:09:00.600 --> 0:09:03.680 them like classic bank lending, where the banks raise overnight 0:09:03.720 --> 0:09:08.360 money to make thirty year loans. The private credit model 0:09:08.559 --> 0:09:11.679 has always struck me as being unusually not runnable, right, 0:09:11.760 --> 0:09:15.000 Like you can't usually, I mean you sort of can. 0:09:15.200 --> 0:09:17.960 You don't really like redeem your life insurance policy, right, So, 0:09:18.040 --> 0:09:21.520 like the theene has like really long term money and 0:09:21.559 --> 0:09:25.520 if like credit gets worse, like no one is clamoring 0:09:25.559 --> 0:09:27.120 to get their money back, so Athene can kind of 0:09:27.200 --> 0:09:29.680 ride that out. The theene is Apollo is like captive, 0:09:30.679 --> 0:09:34.760 but once you do it in a like instant liquidity 0:09:34.800 --> 0:09:37.160 retail vehicle, like that changes a little bit, right, And 0:09:37.200 --> 0:09:39.640 it's like for the retail vehicle, the liquidity is like whatever, 0:09:39.679 --> 0:09:42.080 it's rodded by Apollo. But for Apollo, it's like you've 0:09:42.120 --> 0:09:44.440 shifted your funding model so that it went from being 0:09:44.480 --> 0:09:47.000 like arguably one hundred percent of your funding is from 0:09:47.040 --> 0:09:50.640 insurance company clients, where like it's like permanent funding to 0:09:51.240 --> 0:09:54.160 a small but you hope growing percentage of your funding 0:09:54.200 --> 0:09:57.320 comes from retail investors who can take their money out 0:09:57.360 --> 0:09:58.720 at any time. I think gets like a little bit 0:09:58.760 --> 0:10:01.600 more fragile. It's like, you know, I wouldn't worry so 0:10:01.679 --> 0:10:04.679 much about the fund being able to get its money 0:10:04.720 --> 0:10:06.679 back out of Apollo. I worry a little bit like Apollo, 0:10:06.840 --> 0:10:09.800 like making its funding model a little bit worse. But 0:10:10.559 --> 0:10:13.880 you can understand why they think it's worth the risk 0:10:13.960 --> 0:10:16.040 because one again, they're starting from nothing, so it's like 0:10:16.679 --> 0:10:19.560 day one, that risk is very small. Yeah, and then 0:10:19.800 --> 0:10:21.480 too if it gets really big, then it's a nice 0:10:21.480 --> 0:10:21.920 problem to have. 0:10:22.440 --> 0:10:25.000 I cannot wait to see how this is received. I 0:10:25.000 --> 0:10:27.959 mean day one is Thursday. I mean I can't wait 0:10:28.000 --> 0:10:30.360 to see what will look like on Monday, what it'll 0:10:30.360 --> 0:10:32.760 look like in two weeks, two months, et cetera, what 0:10:32.800 --> 0:10:34.120 the reception will be like. 0:10:35.000 --> 0:10:40.080 It's not that private credity. Yeah, very is like this 0:10:40.240 --> 0:10:42.600 hot asset class and subs. But it's also it's like, yeah, 0:10:42.679 --> 0:10:45.520 you get like, you know, slightly better than Bonder. Yeah. 0:10:45.640 --> 0:10:47.720 It's not like space X, right, It's not like a 0:10:47.760 --> 0:10:50.080 lottery ticket. Right, It's like, yeah, it's like a slightly 0:10:50.120 --> 0:10:51.400 higher fixed think of an investment. 0:10:52.640 --> 0:10:55.200 That's true, but still, I mean, it feels like there's 0:10:55.200 --> 0:10:57.840 been so much anticipation for this, certainly. I mean you 0:10:57.840 --> 0:11:00.320 think about the big splash that this filing made at 0:11:00.360 --> 0:11:05.280 the time. Maybe that was just a nice podcast as 0:11:05.400 --> 0:11:08.120 discussed on the Money Stuff podcast, I was not. 0:11:08.120 --> 0:11:10.760 Like hearing on the subway. People have been like, oh 0:11:10.760 --> 0:11:13.160 my gosh, did you see there's a private credit ETF coming. 0:11:13.400 --> 0:11:15.840 Well, this will be a good reality check to see 0:11:15.880 --> 0:11:18.440 whether this sort of lives up to the hype, at 0:11:18.559 --> 0:11:21.360 least in the ETF world. It's a big moment both 0:11:21.679 --> 0:11:24.600 for the ETF world but also for just the world 0:11:24.640 --> 0:11:26.120 of private assets. 0:11:26.480 --> 0:11:28.079 Oh yeah, I mean I do think and we've talked 0:11:28.080 --> 0:11:32.480 about this too. Like the idea that private credit won't 0:11:32.840 --> 0:11:36.160 trade on an electronic platform like m it was just 0:11:36.200 --> 0:11:38.560 like a weird like blip in time, Like there's no 0:11:38.640 --> 0:11:40.520 reason for that. Like in five years altho it would 0:11:40.559 --> 0:11:43.720 be like big electronic trading platforms for private credit loands 0:11:43.720 --> 0:11:45.200 like sure are why not? It's fine? 0:11:45.400 --> 0:11:48.200 Yeah. Also, if we stretch our imaginations, and this is 0:11:48.200 --> 0:11:50.800 something that I haven't really had time to do yet, 0:11:50.880 --> 0:11:54.120 But the fact that this is a partnership between you know, 0:11:54.160 --> 0:11:58.199 an ETF firm established ETF firm State Street with Apollo, 0:11:58.240 --> 0:12:02.439 which is acting as look provider. You could dream of 0:12:02.720 --> 0:12:06.000 how that model evolves. Some people, including morning Star, have 0:12:06.160 --> 0:12:09.679 pointed to we'll probably see more of these liquidity partnerships 0:12:09.679 --> 0:12:10.240 in the future. 0:12:10.559 --> 0:12:13.520 Yeah, although like that is also possibly transitional, right, And 0:12:13.559 --> 0:12:18.160 like in a world where like there is easy liquid 0:12:18.160 --> 0:12:21.800 trading of private credit, if you're an ETF provider and 0:12:21.840 --> 0:12:25.199 you're looking to start at private credit ETF, you'll pregner 0:12:25.280 --> 0:12:27.319 with like Chain Street or something. It's just like a 0:12:27.360 --> 0:12:29.959 liquidity provider, not an originator, right, but like for now 0:12:30.000 --> 0:12:33.400 the originators are they are the liquidity providers, and right 0:12:33.480 --> 0:12:36.600 every other originator is probably going to get into having 0:12:36.640 --> 0:12:37.200 an ETF. 0:12:37.400 --> 0:12:41.640 Yeah. Also, the fee seventy basis points is that high. 0:12:42.520 --> 0:12:46.520 I mean, it's not low, but considering the I don't 0:12:46.520 --> 0:12:49.480 know what the cost for a retail investor, like an 0:12:49.520 --> 0:12:54.440 average individual investor to get access to private credit now 0:12:54.720 --> 0:12:57.000 without an ETF would cost. I will say there's some 0:12:57.040 --> 0:13:00.440 like leverage single stock ETFs that cost more than one percent. 0:13:00.760 --> 0:13:04.720 So this is pretty I mean was for credib for 0:13:04.800 --> 0:13:07.959 a brand new product, a brand new category, actively managed 0:13:08.000 --> 0:13:11.840 obviously some many basis points. Is really cheap all things considered. 0:13:12.520 --> 0:13:14.959 Yeah, this is not their business, you know, Yeah, I 0:13:15.040 --> 0:13:17.400 think got a lot going on. This is a fascinating 0:13:17.400 --> 0:13:20.360 proof of concept for like, you know, Apollo is pushed 0:13:20.400 --> 0:13:23.720 to like be your one stop retirement provider, right yeah, 0:13:23.760 --> 0:13:26.160 and you know you don't need to make a lot 0:13:26.200 --> 0:13:27.800 of money on this one product in the. 0:13:27.760 --> 0:13:47.160 First week, but maybe they will. Okay, Bill Ackman, friend 0:13:47.200 --> 0:13:51.440 of the show, Bill Ackman making some interesting moves, trying 0:13:51.440 --> 0:13:53.680 to reinvent himself sort of sort. 0:13:53.440 --> 0:13:56.280 Of only sort of. It's so hard to understand what 0:13:56.280 --> 0:13:59.040 a hedgehund is. Like when I was like growing up 0:13:59.080 --> 0:14:01.240 in finance, like that dge fund managers where guys like 0:14:01.240 --> 0:14:05.360 Bill Aackman who like ran kind of concentrated equity ish 0:14:05.520 --> 0:14:08.480 activist ish you know, like got their got in the news, 0:14:08.480 --> 0:14:10.760 like got went on TV. And now like a hedge 0:14:10.760 --> 0:14:15.000 fund is more back to the classical hedged notion where 0:14:15.000 --> 0:14:18.840 it's like these much more you know, multi strategy, multi 0:14:18.880 --> 0:14:24.600 manager factor neutrol. Yeah, kind of quantity funds. But like 0:14:25.360 --> 0:14:28.480 back when like the kings of the hedgehund world were 0:14:28.480 --> 0:14:31.280 like the Bill Ackmans. It was like a lot of 0:14:31.320 --> 0:14:34.120 them kind of positioned themselves as success was to Warren Buffett, 0:14:34.120 --> 0:14:36.200 it was a hedgehund manager for a little while. Right, 0:14:36.280 --> 0:14:38.760 It's like you build an investment partnership where you make 0:14:39.040 --> 0:14:41.640 concentrated long term bets on stocks you really like, and 0:14:41.720 --> 0:14:45.800 you're smart and have a public persona and go on 0:14:45.840 --> 0:14:49.320 TV and that's your business. And like you're self consciously 0:14:49.360 --> 0:14:51.560 a like Graham and Dot value investor, and like you're 0:14:51.600 --> 0:14:53.720 sort of your your investing framework is kind of similar 0:14:53.760 --> 0:14:56.960 to Warren Buffett's. I think that one thing that Bill 0:14:57.040 --> 0:15:01.360 Ackman in particular has learned is that in addition to 0:15:02.040 --> 0:15:06.040 being good at Graham and Dodd and being folksy, Warren 0:15:06.080 --> 0:15:09.960 Buffett has a structural advantage. Like he runs a company 0:15:10.480 --> 0:15:13.040 and that's more useful to him than running a hedge fund. 0:15:13.440 --> 0:15:15.880 And in particular, it seemed to me that Bill Lackman 0:15:15.920 --> 0:15:19.680 really wants to have a thing that is his investment 0:15:19.760 --> 0:15:22.200 vehicle that trades at a premium and that people are 0:15:22.200 --> 0:15:24.440 like willing to pay up to have money managed by 0:15:24.440 --> 0:15:27.560 Bill Ackman. And it has been funny over the last 0:15:27.640 --> 0:15:29.600 year or two watching him like fail to achieve that 0:15:29.680 --> 0:15:32.680 with like his clothes end fund Ipo. 0:15:32.480 --> 0:15:35.040 Also heavily discussed on this pot I have discussed. 0:15:34.680 --> 0:15:37.040 On this podcast. And now what he wants to do, 0:15:37.520 --> 0:15:39.920 He's like, start over. We're gonna do Warren Buffet, We're 0:15:39.920 --> 0:15:42.040 gonna do Berkshire Hathway. We're going to do is we're 0:15:42.040 --> 0:15:45.520 going to buy a small, weird, random company and turn 0:15:45.560 --> 0:15:49.240 it into a gigantic investment vehicle for like Bill Ackman 0:15:49.680 --> 0:15:52.480 making some public stock investments, making some one hundred percent 0:15:52.480 --> 0:15:55.640 acquisitions of companies, just being Warren Buffett, just being an 0:15:55.680 --> 0:15:59.880 acchoir and an investor and a public figure. And I say, like, 0:16:00.080 --> 0:16:02.240 buy some random company. But it's not a random company. 0:16:02.280 --> 0:16:04.280 It's like Howard Hughes, which is a company that he 0:16:04.320 --> 0:16:06.640 has a long history of. It's like spun out of Dtart, 0:16:06.680 --> 0:16:08.840 which is one of his most successful investments. He was 0:16:08.840 --> 0:16:11.160 the chairman of the company for a while, and Pershing 0:16:11.240 --> 0:16:15.840 Square currently owns like thirty something percent of it. And 0:16:16.560 --> 0:16:18.480 what he wants to do now is one buy a 0:16:18.520 --> 0:16:21.680 little more, partly to get his take up and partly 0:16:21.720 --> 0:16:24.000 to just inject money into the company. And then too 0:16:24.120 --> 0:16:27.600 like become the head of the company and let the 0:16:27.680 --> 0:16:30.800 people who are currently running it's real estate business, be 0:16:30.920 --> 0:16:33.480 like one little segment of the company, and then let 0:16:33.600 --> 0:16:36.880 him and his investing team make investments for the company, 0:16:37.000 --> 0:16:38.960 make acquisitions for the company so that it can become 0:16:39.000 --> 0:16:43.760 a borkshare, so that in twenty years you'll think of 0:16:43.840 --> 0:16:47.240 Howard Hughes as a you know, insurance and tech and 0:16:47.280 --> 0:16:50.320 whatever company, and it's real estate will be an interesting 0:16:50.640 --> 0:16:53.160 historical side note. Well, that's also funny that, like it's 0:16:53.200 --> 0:16:55.400 called Howard Hughes like a guy's name and it's not 0:16:55.440 --> 0:16:57.360 real lacking. Yeah, that's the change in there. 0:16:57.480 --> 0:16:59.280 I was googling about it, and I kept getting the 0:16:59.280 --> 0:17:02.160 guy himself. It's not what I wanted. Yeah, it's a 0:17:02.160 --> 0:17:05.240 three point nine billion dollar arche cap company. It's heavily 0:17:05.280 --> 0:17:09.240 involved in real estate, including the seaport for our Manhattan 0:17:09.359 --> 0:17:13.480 natives here. You know what's funny is that they reported 0:17:13.520 --> 0:17:17.560 earnings today, which is Thursday when we're recording this, and 0:17:17.840 --> 0:17:20.520 I was reading through the earnings call and they did 0:17:20.560 --> 0:17:23.160 make a note that the Special Committee of our Border 0:17:23.200 --> 0:17:26.920 Directors is responsible for evaluating Pershing Square's most recent scheduled 0:17:26.960 --> 0:17:30.880 thirteen dfiling and the associated proposed transactions. Thus they will 0:17:30.920 --> 0:17:31.679 not answer any. 0:17:31.560 --> 0:17:33.800 Questions do I love it? 0:17:33.840 --> 0:17:36.640 Well, they got a question about it, obviously it did 0:17:36.680 --> 0:17:39.080 take a few questions to get there. But John Kim 0:17:39.359 --> 0:17:42.840 from BMO Capital Markets was the brave, brave analyst who 0:17:42.880 --> 0:17:45.120 spoke up and said, I was wondering if you could 0:17:45.119 --> 0:17:47.760 provide any sense at all as far as timing of 0:17:47.760 --> 0:17:50.120 when there will be an update, and I just wanted 0:17:50.160 --> 0:17:53.000 to confirm the transaction needs BORD approval and not shareholder 0:17:53.040 --> 0:17:56.520 approval to move forward. Question Mark CEO David Riley said 0:17:56.520 --> 0:17:59.399 that the Pershing Square thirteen DEEN filing is between the 0:17:59.400 --> 0:18:01.520 Special Committe in Pershing Square, and I'm going to leave 0:18:01.560 --> 0:18:05.000 any comments in timing or otherwise for them to opine on. So, yeah, 0:18:05.040 --> 0:18:05.800 scant detail. 0:18:07.240 --> 0:18:12.600 Actually, in my prior life, knowing whether that transaction buying 0:18:12.680 --> 0:18:15.000 like tennis percent of the company when you're already a 0:18:15.000 --> 0:18:18.560 thirty percent holder, Knowing whether that transaction required shareholder river 0:18:18.720 --> 0:18:20.920 was like a surprisingly large part of my prior life. 0:18:20.920 --> 0:18:23.480 But I've never forgotten. Let someone else figure that out. 0:18:23.720 --> 0:18:26.240 God, that would have been so good to bring to 0:18:26.240 --> 0:18:26.639 this pod. 0:18:26.800 --> 0:18:28.280 No, it's shockingly boring. 0:18:30.520 --> 0:18:33.560 That's what we aim for here at the Money Stuff Podcast. 0:18:33.680 --> 0:18:39.040 Shockingly boring. I have some questions. One, so it's a 0:18:39.119 --> 0:18:42.120 three point nine billion dollar company. It's a good company, 0:18:42.200 --> 0:18:44.199 he has a long history with it. Why not just 0:18:44.240 --> 0:18:46.080 take Pershing Square public? 0:18:46.600 --> 0:18:48.800 Wasn't no, No, because because you have to have a 0:18:48.880 --> 0:18:51.440 regular company. Okay, it's the real estate companies. 0:18:51.440 --> 0:18:54.760 It's like, take your hedge fund public and be this. 0:18:54.760 --> 0:18:56.080 Is what this is what he tried. He tried, I 0:18:56.080 --> 0:18:57.440 mean not the hedge fund, but he tried to take 0:18:57.480 --> 0:18:59.440 a close and fund public. Yeah, but it turns out 0:18:59.440 --> 0:19:01.680 that if you just have closed unfund, it won't trade 0:19:01.680 --> 0:19:03.560 at a premium, and then like all of the magic 0:19:03.600 --> 0:19:04.080 goes away. 0:19:04.240 --> 0:19:07.120 I thought that the closed end fund was launching as 0:19:07.359 --> 0:19:10.120 a step in taking Pershing Square itself public. 0:19:10.880 --> 0:19:13.800 Yeah, But taking Pushing Square itself public is is not 0:19:13.960 --> 0:19:15.960 quite the same thing, because when you take a hedge 0:19:15.960 --> 0:19:20.719 fund company public, you're capitalizing a fee stream. Yeah, And 0:19:21.440 --> 0:19:23.480 he doesn't want to sell a fee stream. He wants 0:19:23.520 --> 0:19:25.720 to sell a pot of investments at a premium. Right. 0:19:25.920 --> 0:19:27.560 It's now breaking my brand a little bit to think 0:19:27.560 --> 0:19:29.760 about taking a hedgehund company public and then in that 0:19:29.840 --> 0:19:34.639 hedge fund company buying assets. But it just seems it 0:19:34.720 --> 0:19:37.000 seems like a weird sort of cannibalism or something. 0:19:37.280 --> 0:19:38.359 Okay, not doesn't like it. 0:19:38.840 --> 0:19:43.240 I don't know why. But to me the question is like, Okay, 0:19:43.240 --> 0:19:46.240 you like Howard Hughes, but like there's three thousand companies 0:19:46.280 --> 0:19:48.879 out there, just by any one of them doesn't matter. 0:19:49.280 --> 0:19:52.879 Like we talked about like Brad Jacobs and QX out buying, 0:19:53.000 --> 0:19:55.440 like just like the most random software company to like, yeah, 0:19:55.520 --> 0:19:57.920 build his logistics upire out of it. It doesn't matter. 0:19:57.920 --> 0:19:59.719 They just get rid of the software company and then 0:19:59.760 --> 0:20:01.960 you have your you know, clean sheld to do logistics 0:20:02.000 --> 0:20:05.879 that far. I wrote once about GameStop in addition to 0:20:05.920 --> 0:20:09.840