As billionaire investor Bill Ackman launches his new retail-friendly closed-end fund, Pershing Square USA, he is making a bold case against standard index investing: deep research into a handful of exceptional companies vastly outpaces the broader market.
The Math Behind The Outperformance
For retail investors wondering why they shouldn’t just park their cash in an S&P 500 index fund, Ackman points directly to his two-decade track record.
“In January of 2004… you invested $10,000… at the end of last year, you would have had $90,000” in the broader market, Ackman explained in a comversation with TheStreet. “But had you invested in… our strategy… you would have had $460,000.”
Ackman attributes this massive wealth generation—achieved net of all fees—to actively picking the absolute best the index has to offer rather than blindly buying the entire basket.
Betting Big On ‘Concentrated Conviction’
Rather than holding hundreds of equities, Pershing Square targets just a dozen to 15 “super durable growth companies.” During a rapid-fire exchange, Ackman definitively chose “concentrated conviction” over diversified safety.
“We are a very concentrated investor,” Ackman noted. “The top three, the top four can be half the portfolio.” By deeply researching and often stepping in to help these businesses succeed, Ackman is confident he can generate substantial returns, even when deploying fresh capital at near all-time market highs.
Why ‘Long Term’ Investors Always Win
While Wall Street increasingly obsesses over high-frequency, short-term trades, Ackman insists that everyday investors have a major competitive edge if they are willing to zoom out.
“The benefit [a] long time individual investor has is the ability to take a long term view,” Ackman said. His ultimate advice for building wealth is to start early and let compounding work for decades. He even offered an unconventional strategy to ensure those returns maximize: prioritize your physical well-being.
“Take care of your health,” Ackman urged, pointing to Warren Buffett‘s longevity as a key driver of his historic success. If you can live a long time and stay invested, Ackman says, you are setting yourself up to win.
How Active ETFs Compare
Ackman’s closed-end debut comes as investors increasingly weigh active ETFs mimicking hedge-fund strategies. Funds like the Global X Guru Index ETF (NYSE:GURU), which tracks disclosed hedge fund holdings, and the actively managed ARK Innovation ETF (BATS:ARKK) offer high-conviction portfolios but have faced periods of steep volatility.
Meanwhile, Fidelity’s newly launched enhanced mid-cap and small-cap ETFs, like Fidelity Enhanced Mid Cap Growth ETF (NYSE:FEMG), and Fidelity Enhanced Small Cap Growth ETF (NYSE:FSEG), reflect a growing industry push to package systematic, active stock-picking into low-cost wrappers, competing directly for the same long-term retail capital Ackman is targeting.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Image via Shutterstock
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