Yet Another Value Podcast - Why $PSUS deserves a premium to NAV and $PS deserves a premium multiple | Marlton's James Elbaor

Episode Date: May 19, 2026

James Elbaor of Marlton makes the case that $PSUS will trade at a premium to NAV instead of the typical closed-end fund discount and that $PS will ultimately trade at a premium multiple to peers like Blackstone, KKR, Apollo and Carlyle given its lean team and advantaged fee structure. We push on every part of that, including whether Ackman's portfolio is just an expensive S&P hug, why London still doesn't fully credit him, and whether Spark gives Pershing a real path into Universal Music Group.Sponsor: Fiscal.ai. Real-time fundamental data for global equities, plus one of the leading data connectors for Claude and ChatGPT. Get 15% off at fiscal.ai/yavChapters:0:00 Intro and the divergent thesis1:05 Sponsor: Fiscal.ai2:20 Marlton's lens on closed-end funds and UK trusts5:00 $PSUS: scale, structure, why it's already the largest US equity CEF7:30 The case for a premium to NAV instead of a 15 to 20% discount12:30 $PSUS vs $PSH London: who can own what, and why it matters15:20 The 40-Act book and Ackman's macro hedging history17:50 Track record with and without the COVID hedge22:00 Why London still does not fully credit Bill23:50 "But isn't it just Google, Amazon, Meta?" — the index-hug pushback26:00 Can Pershing get private assets (Spark, HHH-style deals) into $PSUS29:00 $PSCM valuation: 30x FRE and the bridge from $300M to $550 to $590M36:00 Why $PSCM should deserve a premium multiple to KKR, Apollo, Carlyle, Blue Owl42:30 Preferred performance fees and why the income statement is cleaner45:30 Alignment: insiders own 85%+48:00 Permanent capital vs six-year "permanent" capital at the alts49:40 50 employees at $PSCM vs 2,200 at Carlyle52:00 Keyman risk on Bill and Ryan Israel's role58:30 What's next: $UMG, Vincent Bolloré, and Spark as the vehicle1:02:00 WrapLinks:Yet Another Value Blog - https://www.yetanothervalueblog.com See our legal disclaimer here: https://www.yetanothervalueblog.com/p/legal-and-disclaimerProduction and editing by The Podcast Consultant - https://thepodcastconsultant.com/

You're about to listen to yet another value podcast with your host, me, Andrew Walker. Today, I've got James Alvar from Holted back on the podcast. James is an expert on closed-empt funds and in general and Persian Square in particular. And we're going to talk about PSUS, the new Persian Square closed-em fund. And we're going to talk about PS, the new, the Persian management company that came public alongside PSUS. And it is a fascinating conversation. You know, I think James has, let's just call them divergent use on. on both pieces and PS and PS.

Pieces, he thinks it's going to trade for a pregame to N.A.V. And it's going to be kind of the premier closed-end fund over time. I don't want to put words in his mouth, but I think you'll listen to the podcast hear that. And on PS, I mean, we just have a fascinating, fascinating discussion of there is a lot, you know, it is a brand new management company just traded. The cone is so wide in terms of which way you can go.

And I think James has seen the ball very clearly on where it's going and devaluation discussion, all that's yourself. So we're going to get there in one second, but first, or from our sponsors. Today's podcast is sponsored by Fiscal.A.I. Fiscal.A.I. is a moderate financial data provider for global equity. In addition to their web-based terminal, Fiscal is one of the leading data connectors for Claude and ChadGGBT.

With their self-serve API, you can connect in real-time fundamental data directly to your LOM. And look, I sent it in a podcast before and I'll say it again. I am, they're not just an advertiser. I've been doing lots of cool stuff. with Claude and cowork in particular, building all sorts of awesome tools, and I need an API. So guess what? I signed up with my own money, tossed my own credit card down and said, hey, fiscal.a.I. I need you guys to plug into my clawed code for me so I can keep building these tools and

Abbas, that's real-time, fundamental data, and stock prices everything. And that includes more than 20 years of financial statements, ratios, filing segments, KPIs, and all sorts of other things. Unlike other providers, their data updates within minutes of earnings reports, not days. So whether you want powerful out-of-the-box terminal or the real-time AI connector with API, you can use my link at fiscal.a-i-i-slash-Y-A-B, that's fiscal.a-i-slash-Y-A-V to get 15% off. And there'll be a recommend show notes too. All right, hello, and welcome to the end of another value podcast.

I'm your host, Andrew Walker. Today, I'm happy to have on for the first time made a long time. My friend James Elfar, James, how's it going? It's going great, Andrew. Good to see you again. I'm really excited for the conversation we're going to have today. before we get started, reminder, nothing on this podcast is investing device. There's a full disclaimer in the show notes and at the very end of the podcast as well.

James, the company we're going to talk about, say it's kind of two companies, but it's the Persian Square Complex. You know, they just IPOed the PSUS, which is the closed end fund, and they just IPOed alongside that PS, which is the Persian, you know, management company overall. And I will just pause there. We can talk either piece of those, but you are like kind of the expert when it comes to the Persian complex. So I'll pause there and ask what is the Persian complex and why are they so interesting right now? Yeah. So when we first did, when we first did the podcast with you, we did Persian Square

Holdings, which is a closed end fund, it's technically a UK Investment Trust, trades in London. I think what I want to mention about that investment, because I looked back, you would as of, as if you had invested in September 2020, when we did, again, not investing in advice. So, But since from there to where we are now, that is compounded greater than the S&P 500, with the exception of the last two months into this year where we've seen a pullback. So instead, you're matching the S&P 500 and then you had a free option on the fact that he could have redomiciled that business. So that's that closed-end fund sits out there. That discount still is trading in the mid-20s.

I still think that that's a great compounder and doing fantastic job, but I did want to bring that up, because I'm really quite proud that, you know, if people did listen to that, they did okay. That's all you know for, right?

Well, I guess you can hope for better, but it is nice to be able to say, okay, instead of there have certainly been some, hey, if people listen to that, they got their shirts hurt off and they're looking under a bridge right now. Getting 19% annualized,

I think is fantastic. But to each... You know, just on that real quick, it's funny where you say, hey, you did along the lines of the S&P 500. And then you're like, oh, the S&Ps compounded at 20% per year for the past three and a half years. Like, if you match that, it's so simple. It's so, try to say, oh, you match that.

I was like, dude, 20% for a year for three years is like kind of legendary, right? Like anybody would take that. So, and I'm not saying that about Persian in particular. I'm just saying as managers, like you are ultimately benchmarks of indices. And sometimes like, man, I'm just matching this. indices, and then you step back, you're like, well, the indices are running like 15% every year. And yes, it's a huge tailwind. But if you have any cash, any under exposure, if you're less concerned, if you're more

conservative than to it, all right, just ramblings of somebody who watches the indexes go up every day. No, all good. So, I mean, let's talk about like where we are this year. This is already one of the largest financial launches, gosh, in in years. Okay. So when pieces IPO, you're talking about the sixth largest IPO of the past decade. It's, you know, among the 20 largest IPOs truly in U.S. history at this point, you know,

and it's two times larger. So pieces at $5 billion is two times larger than the current largest U.S. equity closed-ed end fund. Well, you can't say that anymore because it is the largest U.S. equity closed-ed fund. It is. So now it is the largest. It is. And I feel like, you know, the market is looking at this and treating this like a closed-end fund.

But to me, Andrew, the scale, the structure, and just generally the franchise quality are unlike anything that you really see in the general retail market that these closed-end funds typically traffic in. So I think when investors are going to start to see that they aren't seeing right now is that this is not going to be treated like a closed-end fund product from an asset manager. This is going to be treated much more like a holding company just in the wrapper of a 40-act fund. So you're going to see, you're going to see quarterly earnings calls, you're going to see reports, significantly greater reporting, much, much greater corporate access to Bill and the team. I think it's quite exciting in, I think it's exciting in that respect. You're talking about pieces right now, which is the closing point. Yeah, I'm just talking about people.

For people who turn in for PS, we are going to talk about that at the end. But let me gently push back on what you just said. I mean, I want to push back in few places. I mean, you say, hey, this is going to get treated. like a holding company. And we can talk holding company versus close in the second, but my first pushback would be, okay, I know a lot of holding companies, right? IAC, all of the Liberty Complex, Knai of Mothwellers. Now, all of them have varying degrees of, you know, different management teams, different management structures, incentives fees, whatever it is. But none of them traded a premium,

right? So when you say, hey, I think PIS is going to be a holding company versus a a closing fund. And I'm not sure if he's going to actually take like full control of businesses or not in that. I can't remember if you meant from I just reviewed the first, the road show. He wasn't talking about that. But maybe that would be the step to a holding company versus closing fund. But even if I gave you, it's going to be treated like a holding company,

not a closing fund. Every holding company trades. I mean, pieces is trading out about a 15 to 20% discount right now. Like that's on the high end of holding company. So my first pushback would be if you. If you get what you wish for, it's kind of, it's AFDET. Like, would it really trade it a preemate? So, you know, just to level set for those that aren't familiar with Marlton,

we're an investment firm, we focus on U.S. closed-down funds and UK investment trusts and structurally discounted securities. And if I can, if I can tuge, if I can ture horn, you've done great work. I mean, I know the Persian discussion we had had great work. I know you were instrumental in the, uh, the third point, the London thing. and the thing that became Mount Logan. I mean, that deal was, I can't say I was like deep in the weeds, but I think it was going to be quite poor.

You guys were instrumental in pushing back and getting a lot more economics for shareholders. So you guys really specialize in this. Just talk briefly about Turn and Mount Logan, you know, when we were the activists there, shareholders and speaking about premiums to NAV, shareholders received 110% of NAB in that deal and much more typical deals are nav for nav deals.

So you very rarely see a premium. We did push for that. We do like the BC people run by Ted Goldthorpe and his team there. And we think you have no real view on Mount Logan today. But I do think shareholders that were in turn that then went into the merged entity, receiving 110% of NAV was certainly fair. We would have liked more, but was still fair. But speaking about premiums here, just on a second.

You can take a look at Robin Hood's latest venture fund that came out is trade and a large premium now, too. I track all the big movers every day. And the other day, I was like, what is this RBI? The Robin Hood Venture Fund is like the best performing stock in the entire market yesterday. So there are times where these entities do and will trade at premiums to NAF. Generally, they will trade at discounts to NAF. And I like to think of discounts very similar to multiple. So there will always be some type of a compression on the multiple or a multiple may not fully reflect the true economics of the business or the earnings power that you think the business is going to recognize.

I think the same thing with discounts. These trade at structural discounts. The issue is how do we allocate capital? How does underlying NAF grow? And then you can think about the discount as if it is a multiple. in that way, like greater discount, cheaper, smaller discount, more expensive, more risk, that you're not going to see the underlying growth that you think you're going to see in NAF. So that's how we think about it.

That makes total sense. So, but let me just put you on there. I hear you on the greater and smaller discount. But again, you said, hey, I think pieces is going to be treated like a holding company, not a closed and fund. And even if I agree with that, like, I would just come back. to a 15 to 20% discount is not atypical for a holding company, especially one that is, this is an externally advised holding company, right?

2% management fee is what they're paying. So why do you think this will trade at a premium when, you know, even if I grant you, it's a holding company, almost every holding company trades at a discount? So I would look at the just generalized performance. We think that this is going to significantly trade much closer on a base case, significantly closer to a nine discount, which is the peer average within U.S. equity closed-end funds. And frankly, if you, if you, I'm not trying to be big cheerleader here, but I really believe that it should be much closer to a four-discount, which is where Gabli's closed-end fund is trading right now. Gabli's closed-end fund is about a $2 billion closed-end fund, trades at a 4% discount to NAB has underperformed the S&P 500 since inception, huh?

and Bill has outperformed. So I think maybe it's a function of time as to letting the market see this. You got to remember, pieces now still hasn't even reported NAV. So we're not even sure what's in the portfolio yet. We're not even sure what NAV is. I think there's a lot of catalyst

to kind of unfold there, to see what's in the portfolio, how the portfolio has performed. And once we get into a cadence of regular reporting, that discount is not going to be sitting at 17. I just fundamentally don't see it that way. What you're seeing is because their website has the weekly nav. They've got the 4871 is the nav right now,

but we don't know what's in. We don't know what they've, I mean, I'll be, it's certainly going to mirror what Pershing, PSH London, PSH London has, but we don't know kind of how they've deployed, how much is cash versus deployed all that type of stuff? That's right. Yeah.

Okay. Let me ask you, So just quickly on, let me go to, there, I mentioned PSH. Pieces is trading at a 17% discount to NAF. PSH, if I just pull up my little Bloomberg nav thing, is now trading at a 32% discount to NAV. And I'm sure if I said either or you might say, hey, why make me choose between both?

But why would someone consider Pieces versus PSH? And this doesn't, again, nothing's investment advice. You don't have, but just when you're weighing the two between each other, what is the upside downside? And I think there's that question. And we can also talk to management fee performance fee all that's for stuff. But why one versus the other? So I would say in the most practical, in the most practical way, there is an investor, there is a investor base that just cannot invest in PSHD that's trading in London, but can invest in pieces because of where they're domiciled and their tax considerations. Similarly, there are

Like, for example, Texas teachers, Texas teachers filed a D on PISA. They could not invest in PSA. They're not, they're not permitted to per their mandate. Separately, huh? You can now have a whole investor base that can invest into pieces. You have a completely more European-centric investor base that can invest in Persian Square Holdings in London. Persian Square Holdings in London does pay a performance incentive,

which you do not see in PISIS, but Persian Square Holdings in London has a significantly longer track record in addition to a lot more flexibility to make investments that are a lot more esoteric that the 40 Act is much tighter on. And I think, and you can correct me from all. Yeah, let me just kind of read that real quick, Andrew.

So what I would say is if you want, like, I hate to make a reference like this, but if you want like free-based bill, like you want like pure bill and team i would say persian square holdings london has significantly more of those characteristics pieces is much more of a traditional 40 act fund but that will be different you're talking about a team that never does things you know they don't they'll follow the path that's always been followed before them they're they're very much trailblazers they're very much a kind of class in that way.

So I anticipate and I feel the pieces will be different than typical closed-end funds, because that's just the history of that team. But there are real-world 40-act constraints there, and so it will be significantly slightly more constrained than the way that PSHD and London trades. But because of that, in Persons Warholings in London, you're going to pay the performance incentive there. I'm going to come back to Persian Square in a second, but I do want to ask you, your question on the 40 Act.

You know, a big pitch that Bill has been making for the past multiple years for Persian is, hey, you don't just get our stock picking skills, right? And our concentrated holdings of like kind of the best businesses that we can find at reasonable prices and all this type of stuff. You

get our Hegi book. And Bill made, you know, one of the best trades of all time in the I mean, it's funny when you say he made one of the best trades of all time. And if I stop there, you would say, oh, which one of his trades are you about, are you talking about GGP and bankruptcy? But the one I was actually referring to was the COVID trade, right?

The COVID hedging trade where he says, hey, we made basically a hundred times our capital on that. And then he makes the inflation trade in 2000, late 2020 through early 2020, makes the inflation trade where he makes 10-X's money. So a big piss for a person recently has been, hey, we're not only going to get our stock picking skills, we actually have demonstrated track record. We've got those two. plus we've got the hedges we did during the GFC, which was like a 20 dagger,

the next time there's a big macro event, there's a decent chance we're going to see it ahead of time and we're going to hedge it and we're going to make multiples of our money, right? Can they do that in the 40 Act Fund, the PISS? So I would say traditional closed-end funds do not do that type of activity, but I fully anticipate that there will be a creative way that Bill and team will allow that vehicle to make trades like that. I would just circle back because otherwise I'm going to have to, you know, pontificate

as to how they could go ahead and do that and I don't have the time to do that right here. But what I would say is just to reiterate what you said, because I think it's worth saying, we're less than 30 days into trading. We both agree, and I think most people would agree, some of the greatest trades put on of all time, huh? And the vehicle's trading at a 17% discount.

to NAF, huh? And I would then go ahead and take a look at other vehicles. You know, like you mentioned, like IAC, Barry Dillers, fantastic, great capital allocator, her, but you also trades at a perpetual discount to NAF. You're consistently trying to allocate capital in the best possible way to create shareholder value. I think you're super early innings at a very wide discount out pieces. You know, it's fine when I've talked to people about Ackman's track record, or whatever, let's just say the past 10 years before, a lot of them have said something along the lines of Oh, if you take up the COVID hedges, it doesn't look as good. And look, I'm up to mind.

I'm like, okay, I hear you, one trade, but at the same time, A, we live in a scoreboard world, and B, he called a shot. And, you know, if you took that out, if you said, I don't know the numbers exactly at the top of my hand, but if you said, hey, over the past 10 years, he's outperformed the S&P 500 with that. And without it, he, I mean, he got a hundred backer. So without it, okay, he's in line with the S&P 500. we live in a slugging percentage world.

You can't take that out. So anyway, I just, you know, I don't think it's fair. I would say, I would say that that's almost, I don't want to say it's a silly argument. I understand the argument, but I do think it's a little silly. Like people make the investments that they make. If you go ahead and say, well, then I guess you have to take out general growth. I think you, then you have to go ahead and take out that he created a very, he created it's Spark, or he launched the largest spack of all time in Tontine.

There's, you can't, you can cherry pick, but, you know, somebody's history is somebody's history in their entirety, and I think you have to look about it, look at it in the entirety. If I can take a hit of my hypothetical bong and put us on a college drum room for a second, well, I agree with you, you know, I do, the reason I think about it is there was some, there was one person who I was talking to in like late 2020, and they're like, you know what my best stock idea is, GameStop. People are going to be, you know, I think this is a killer company, like Ernie's are going to go through the roof, all this type of stuff.

And every piece of their thesis that they laid out was comically wrong. I mean, comically wrong. But GameStop had this massive short squeeze and all this type of stuff. So I don't know if they held on to their position or not. It wasn't someone like I really talked to a lot. But, you know, if they had a track record and they had held it, their track record would put everyone else's track record to Shane, and it would have been like, well, yeah,

but you kind of were like literally the monkey that landed on a lottery ticket. So I just keep that in my head all the time, and I'm not saying that, but it is, you know, that is such an extreme hypothetical example. It illustrates the point very nicely. Anything else on me after hitting that hypothetical bongar, I'll die back into PSH if you want to, unless you want to talk about anything there?

No, I think we're good, but let's, Let's just a thing, because PSI is actually like really, really quite interesting. So PSH, if I can just ask you on that real quick. So that trades in London at a 33% discount. And I believe you also get, they have a little bit of leverage, which PIS could. Fortyac companies can have leverage, but they obviously don't have leverage yet. You can tell me if they're going to have leverage or not. If you, if I just said, hey, you know, strip aside, especially the mandate piece of it,

PSH versus pieces, which do you think is kind of more attractive? Oh, right now, I would say, I would say pieces. So we think we anticipate that pieces will run slightly levered. I think, you know, for us, for us in the immediate term, the comps for pieces and where pieces should trade. at a nine discount, they're just deploying capital now, I think makes PISIS significantly more attractive,

than PSHD. We like PSHD, we were in PSHD, we're full disclosure, we're not in PSHD at the moment. We are in PISIS, obviously. But for those that are in PSHD, you have a bunch of positive catalysts that are happening there. The discount is at 30 plus, it's historical, wider than being at 25, so we expect that that could probably come in.

As PIS and other assets outside of PSHD grow, you're going to get a fee rebate. That grows at PSHD, which is hugely creative to those shareholders there. I think that there's plenty of plenty of positive attributes there. I also think that realistic, like truly what we have discovered, if anything, from our time in London and we do spend quite a bit of time because of our UK investment trust exposure there. The investor base

in London does not really see or understand Bill in the way that American investors and retail and institutional see and understand bill. Like trying to pitch

yeah, I'm not going to use names but trying to, to the big allocators in London that invest into UK investment trusts, that pitch is much more difficult to get people comfortable with this American investor in this UK part of the world than it is to get American investors comfortable with who Bill Ackman is. I'm just laughing because the stereotypical British manager allocating capital, like they want to allocate to so well-dressed, well-spoken, silver-haired managers. and Bill, like, check, check, check every one of those boxes.

And I understand, hey, that's a stereotype. I'm laughing. I'm not trying to make it. But Bill checks the box is so hard. It's just kind of funny. I guess American versus Prish. Let me ask about the Persian portfolio right now, right? The reason you're in pieces and you think it will trade at a premium over time

and Bill thinks it will trade at a premium and all this sort of stuff is there arguing Persian is going to outperform. People will pay for that outperformance. And especially once you start putting non-recourse leverage onto something that's generated in alpha, I mean, my God. the sky's limit, if that is true. The trick is always if that is true and if that is liverable. But I think one question people might have is,

hey, if I look at the Persian portfolio right now, and I'm trying to find where I save this, but, you know, it is great businesses, but Google, I can't find that. And she, but Google, Amazon and meta are three of the positions, right? Hey, those are three of the largest positions in the SMP 500. I mean, those are three of the largest companies in the world. I think when you kind of look at those, you might say, hey, great, he's allocating to these great businesses.

But how are you going to generate like alpha if you're kind of matching. Essentially, we see that as first, they're great businesses, as you said, second on a multiple basis. Many of them are trading at multiples below the S&P 500. And secondly, so one practical implication is you could say or you could argue, bill's going to hug the index and why should I pay 2% of a management fee to bill when I can get a almost negligible ETF? Well, what I think you're going to get is you're going to get a portfolio of securities that probably hugs most, hugs major components of the index.

In addition to these smaller investments that have significant, significant, and embedded upside. So an example would be Spark, any type of a SPAC forward purchase agreement. I think they're going to be incredibly creative as to these different types of securities that will be in there, that may be valued at cost or undervalued when you actually put a real mark-to-market value on that, and that's going to be a function of them being either a level two or level three security. But essentially, I think there is a real going to become overtime, a real view that these are much more of a sum of the parts story and that the nav may be understating really the embedded growth

that you're seeing in there. In addition to the fact that if this closed M-Fund, which we anticipate will have a distribution rate and pays a dividend, you have that as well. So there's a couple different ways that I think this is going to play out well for shareholders. Can they get, I mean, you mentioned SparkQuitch, full disclosure, I think, kind of a bunch of them from the old Persian days and kind of

rolling it. Can they get tier two assets into pieces, which is a close-end fund 40-a-company company? Like, I suppose there's a creative way to do it, but something like smart, or we had mentioned with holding companies buying a whole company. It doesn't seem like it would fit in there. No, no, there's, well, okay, so I think there's a couple different things. One, can the security be embedded into the 40s, yes? can they absorb a private company into pieces the closed-end fund?

One thing that I have learned, and I think it hasn't been said enough by media or others, is that for the Persian Square team, where there is a will, there is a way. So I would never say, never, that they can't do something, because they consistently show people that they can. Do I think it's likely? I think it's unlikely, but I would never say never. That makes sense. I want to talk a little bit about the thing I'm, to be honest, more interested in,

which is PS, Pershing, the management company that was publicly traded alongside this. But I just want to make sure, before I kind of move on to that pasture, is there anything else on PIS or PSH or anything we should be mentioning or people should be thinking about? No, but so I would say, you know, to lead into that, I'd say you've got PIS is PISIS is the fund, and then you have P.S. is the business. Yeah.

So that's where you have, you know, that's where you have really, really the business side and the franchise side of this. So P.S was, you know, it is publicly trade now. It is the Persian management company. This is the thing that owns and collects all the management fees

and performance fees and everything from all the Persian funds. And interestingly, you know, all the Persian funds, not just now, but that he launches going forward out of Pershing Square. And obviously, that is the appeal, right? The potential for this to become an asset gatherer. And I think he mentions launching the potential to launch an absolute return fund, the potentials to launch a private equity fund, all this sort of stuff. Like, when you're buying the management company, okay, you're buying the management fee streams, you're buying the economics of the permanent capital vehicles that they may hold on balance sheet. investing in any future fund launches, you're investing in really the growth of the AUM on the management

platform. You're investing at the top of the tier. So they launched and they were very nice equity holders. They launched with a clean. We're going to have 400 million shares outstanding no matter what happens with this launch, right? So there's 400 million Persian outstanding. As we're talking to trading for about 40, 50 per share, so the market cap is 17 billion. How do you look at with the valuation and everything, because I've got upsides and downsides to talk about, but how do you just kind of look at the valuation and the value of the PS manager there?

Okay, so we see this as trading, this is just our view, I'm just pulling up our own model here, because I think it might help people. For us, our projection, huh, on adjusted fee-related earnings, this is just again, our projection, Okay, this is all internal to us.

We see them doing anywhere between 550 and 590 in fee-related earnings. So that puts us at approximately 30 times fee-related earnings. And then go ahead. Can I pause you there? So you said 550. I'm just going to choose that number. They have a slide in their deck, slide 31 of their roadshow, that shows FRI, for 2025 is 300 million.

And then you layer on top of that what they get from pieces, what they get from HHS, and anything else they do. So could you just walk me from the bridge from their 300 trailing before pieces, before HHS number, to your 550 number?

Sure. So let me tell you kind of the fee-paying AUM numbers that we're using so that if it's helpful for others that are building their own models. For us, we have Persian Square Holdings at $21.2 billion, We have Persian Square LP at a billion.

We have Persian Square International and about 500 million. We have Howard Hughes at about 5.4 billion. And then we have Persian Square USA at a year end closer to $6 billion. So that takes us to a total of $34 billion. And then, you know, that's not counting the fact that the Financial Times, which has not been commented on, so we really don't know, but the Financial Times mentioned

that there may be a lodge of Persian Square asymmetric, which would be this more kind of global macro hedge, his larger hedger bets. And so there's no credit for any AUM growth that you see there, but all that takes you to 34.1 billion, and then, you know,

we're applying a run rate, you know, fee-related earnings yield of about 1.8%, so that takes you to 597. I am kicking myself because, so the IPO and, you know, PS, this was right in my alley. I was like, hey, weird IPO structure. Some people might want PSUS and get the PS share. Some people might want PS. So I was following it, and I had a bid in for 20x, my fee-related earnings, and my fee-related earnings were just a little bit lower than yours, but it was the difference between me having a bid, like right when an IPO filled and not filled, and the stock is about

a double since an IPO. So if I had just maybe model-checked my numbers with you, maybe I would have gotten filled on something that doubled. But maybe what's helpful, Andrew, is just to talk about the comps for a second, because it does come down to like what the multiple is, right? Yeah, I was, that's where I was going to drive. So please, let's talk multiple the comps. And I do have some gentle pushback I'll give as well. Yeah, but please do, because we'd love to hear it. But like for when we're looking at, when we're looking at the cops, okay, so if you take Apollo that's trading 30 plus,

you've got Aries, very, very high 20s, then KKR, Blackstone, TPG, Carlisle, Blue Owl, and then, you know, if you want to add Grovener in there, which is at a very low multiple, you could add Grovener as a comp as well. So in general, these comps are trade on an average of like 27 next 12 months. Persian Square, there's something very specific about Persian Square that is not like these others. Almost all of these other asset managers have made a bet on their business, specifically on private credit and the growth of private credit. In addition to these businesses being more liquid capital businesses, traditional LP funds.

So you are consistently adding new products, new funds, you have a very heavy business development team. That is constantly replacing capital and then trying to grow generalized capital as well. On the Persian Square side, you're looking at $34 billion of permanent capital, capital that cannot leave, and a head count of $50. 5-0. Carlisle's headcount is over 2,200 employees. So where do we see more growth? By the way, they've compounded, just take this one step further.

Pershing Square has compounded capital at roughly around 20% annualized over the last, let's say last five years for argument's sake. That means by definition, if they continue to do that for the next three years, AUM will now be over $60 billion. And there is significant operating leverage in this business. We don't see this team going from $50,000 when they're managing $60 or even $90 billion. We see this team staying pretty stable, maybe incrementally adding an employee or two a year. So you're looking at getting to $90 billion and the employee count is going to be.

to be sub-75 people. Great, great overview. And you really get the nail on the head with, this is why I was so interested in it. God, damn, I'm just kicking myself. I was just too conservative on it. But these are like literally permanent fee strings. You know, PSH, I don't think there's anything you can do to locate.

PSUS, good luck. It's a $5 billion clothes, then fine, managed my purchase. Like, these are, they're permanent. So you can apply a huge multiple on them. It's just, it's fascinating. But let me give some gentle push. Back. Number one. Oh, HHS, absolutely permanent there. I think my first pushback would be, hey, even if it's above 30 and it's as permanent as I'm saying, that's great. But you do still need

to grow the business, right? Like KKR, all these guys, they're so locked in, that you have the private credit issues. But I mean, these are, as I used to say, nobody ever got fired for buying IBM. No CIO ever got fired for saying, hey, we're investing in KKR's next fun. So these guys are just like levered, levered growth on just financial assets, right? PSH, if I look across the board, H-H, HHS, PIS, everything's trading at a discount to NAV. It's going to be hard for him to grow. Now, PS's argument is if we get one big launch,

it's a step change function for us for us, because we're so small. But it's hard to see the growth there just because everything trades at a discount. So if you say, hey, this is over 30x and the numbers are, but I'd say, yeah, but everything else has like a much cleaner path to growth. So I'll pause there and do have a few more I want to talk there.

So sitting at lunch recently, huh, with somebody that you and I both know, a former head of a venture of investing at a very... I don't put off anymore, but I look who you're talking about and I'll like shout out he's listening. What I would say is the argument came, the question came up, said, Why in the world, James, are you excited about this launch?

This is never going to launch. Peaseless in London is trading at a 30% discount to NAF. Nobody's going to do this. Okay. And not only did they do it, it's the largest closed-dend fund launch in history, $5 billion. So I would not, again, I would not want to bet against or discount what this team is capable of doing.

I hate to be this kind of person that draws comparisons here, but I really believe that they have shown themselves that Bill is essentially be Elon Musk of finance, and when he wants to do something, he will do it, and it will get done. I think, you know, practically speaking, people say, how can you launch another vehicle? You now have multiple vehicles trading at discounts to now.

Look at Spark. We think that Spark could come out and do a deal very similar to Howard Hughes, where they take a private company, public and end up managing the business or managing the capital allocation component of the business and fiend off of the, fiend off of the gross AUM there. I think that that's perfectly something that this team is, that this team could do. Don't know if they would, but I think that it's certainly something that they should consider if they haven't considered that already.

There are many creative ways where, I say it this way. We have, you and I both have invested in firms that have your financial engineers at the helm. One thing I've noticed about my experience investing in the complex of Persian Square is that that team structures deals where if shareholders do well, Bill just does a little bit better. If shareholders do poorly, Bill does just as poorly. It is a great alignment of incentives. It is not like other structures that we have seen,

where it is heads I win, tails I win, and shareholders lose. So this is very much a very strong alignment of interest. In P.S., by the way, which I still think you haven't necessarily missed. You could buy some today. If you, looking at P.S., that's 6% of the shares are essentially, are floated out there. So you got 2% that are actually freely tradable, 6% outstanding. That puts you at over 80% of that business, over 85% of that business is owned by Bill and that team.

Talk about alignment of interest. Who is more aligned in seeing that business successful, huh? Well, let me ask them alignment. So there's two interesting questions to pull on here because I can certainly hear you there. And I do think, you know, I'm not a huge fan of how they structured HHS. We can talk about that in a second. But I do think you're on something there like, hey, HHS was perma discounted, all this sort of stuff. And it's hard as a share.

I mean, he comes to a lot of cash in. And he's really not going to make much money on there unless HHS stock goes up substantially, though. You know, I hate up here. On the high watermark, by the way, that compounds. Yeah. Well, but people could have said, like, you know, the board, I'm just saying, like, the Howard Hughes board did a good negotiation here. That high watermark compounds with inflation. Go on.

Dude, on PS, my two things, A, 6% float, there is, right now, let's just use the number 30. So 3.3% cash flowed before taxes on the fee-related earnings, right? There is going to be cash flow, and it's hopefully going to be growing as NAF. What is the capital allocation at PS itself look like over time? Because they've got this tiny float, and it's a asset-like company, so there's going to be a lot of cash rolling there. What do they do?

Are they going to start investing into their deals? Are we going to see dividends? How are they going to make money here? Okay. So we, it's a really good question. Share buybacks probably off the table, by definition. We think that there's going to be a very large payout ratio. So we think that, you know, I think a lot of this cash is going to get dividended out.

And then I would expect that there, so we're modeling in, this is just our model. Okay. We're modeling in 80% to payout ratio, 20% being held for continued balance sheet investments that you've seen previously, like anchoring Spark, anchoring PSUS, doing Howard Hughes. So we think that there's going to continue to be balance sheet investments that are made, but we fully anticipate that this is going to be paid out as a dividend. And let me explain why.

if you look at GNA, okay, if you look at G&A and employee comp, you're not seeing, you're not seeing a huge line item here where salaries are coming out. Really, the Persian Square team is getting paid, A, from the dividends that they're going to receive from the management company, just like they normally would, in a private scenario, huh? And then you have shareholders also,

which, by the way, they own 85% of still, you're going to get this preth on the performance incentive, and then anything greater than the first 5% of return is going to go to compensate the entire team. So what you're really going to see from an asset manager, if you look at the other comps to use comps, okay, look at the blue owls, look at KKR, we think that when you look at PS, you're going to see a significantly cleaner income statement

that is much easier to model, huh? that is much easier to generate forward fee-related earnings on, and that deserves a higher multiple. But go ahead. No, I'm glad you get on this because this is something, again, I was looking at this. I was looking at this pretty close. You know, they've got, it's slide 31 where they've got the FRE,

and it's management fees and then preferred performance fees, and that's what they counted as their fee revenue. And at first, it's like, nobody throws performance fees into FRA, but this is preferred performance fees. So can you just dive a little? Just explain one more time. You kind of highlight it, but just the preferred performance fees, what are they? And then I'll have a follow-up question there.

Sure. So you have, so there's an incentive fee in a hedge fund. If you perform, you get paid at the end of the year on realize and unrealized gains in the hedge fund structure. So the performance incentive really is coming from the PSHD side or the London listed vehicle here where you will get performance incentive on unrealized gains. When you take that, okay, if Persian Square's performed 5%, you know, all the performance incentive is going to the PS shareholders. And if Persian Square performs 10%, you're getting that split essentially 50-50.

So management, Bill and all of them, obviously they will get paid on, they own, what is, 85, 90, whatever percent of PS is. So they get paid if that goes up. But they also get paid if PS has a banner year. They're at high watermark. They go up 100%. They clip 20% performance fees, you know, whatever that is. They'll take the vast majority of that incentive fee is what happens.

Yes. But then also just to talk about how this is like this, this is this wonderfully virtuous circle here. I understand the headline number and I understand the criticism because I've heard this. There was no criticism there for me. I was just making try. Let's say, yes, you go ahead and you have this banner year where all of a sudden you're up 100% and you double AUM and this massive performance incentive fee goes to pay the team. You've also doubled permanent capital AUM that cannot leave and now in the next year in the out year, you're going to see fee related earnings

revenue coming to you based on the doubling of AUM and all the value accretion to the shares that you've seen there. I want to be clear, there was no criticism for me there. I was just making sure I illustrated it properly. I mean, I guess you could, the criticism and this actually leads the next question, the criticism you would have is, look, if you give an incentive where all the, let's just call the management fees, all the management fees go to one thing and then all of the incentive fees go to the people who are like actually running it, well, you're kind of incentivizing them to, if they see something that might be a single and something that might be a grain slam or a strikeout, you're incentivizing them to go for the grain slam every time because, you know, if you get,

if all of your money comes from the incentive fee, you make the same amount of money whether you're, if you make the same amount of money if you're below higher water market, whether you're plus 5% or negative 95% or plus 400%, you'll get paid on the plus 400. The pushback there would be to make it for you. They own so much of this management company, they're not going to do that, but that would be the criticism. That's what I was going to say. I was going to say, yes, if they owned very little of the management company,

then they are fully incentivized to go ahead and hit massive home runs because that's where their compensation is. However, because they own over 85% of said management company, you have a complete balance of incentives here. What I would say is under the current structure, how it looks right now, is not at all dissimilar to how Pershing Square was operating privately and compensating employees privately for the previous five years. So if you liked the previous five years and you said, gosh,

I would really love to own that management company, which is what we thought, you are now going to continue to see that for the out next five years. Let's, we're to go next. I think the other pushback of year, We described everything on FRE number. The other pushback you'll hear is the AUM here is what. It's going to be about, I should be able to do this off the FRI number that we just talked about,

but it's going to be about $40 billion. You can correct me if I were wrong. Yeah, about $34. The other pushback I'll get on PS is, hey, you have an asset manager that is now trading at 50% of AUN, because PS is $17 billion and they manage $34 billion. There is no asset manager that comes anywhere close to that valuation. How would you respond to that pushback? Well, I would respond to that pushback in saying this is permanent capital that cannot leave.

You can say, just so that we're on the right definition, here because everyone seems to define this a little bit differently and you have to look in the footnotes how this is defined uh you kkr blackstone they have permanent capital if they have it for six plus six years so so you know essentially the timing between roughly what our last conversation and now you know that that's permanent capital i mean i don't think that that's really permanent capital this is functionally truly permanent capital. So no, you know, it's not a, it's not necessarily an engine to gather and say out loud that I, you know, Persian Square has, you know, $100 billion of permanent capital.

This is, or $100 billion of capital generally of AUM, of assets under management. I think what's more important here and why you should look at fee-related earnings as a, multiple fee-related earnings is this permanent, this capital is permanent. It cannot leave, it will continue to compound. You could make an argument that this really is a sum of the parts story, huh? But putting that aside, I would say,

really looking at this as fee-related earnings is the way to look at it. There's not, I don't want to talk about competitors or other asset managers, but there are other asset managers out there. Her, they have AUM. It is not permanent. They may call it permanent.

It's like six-year capital. Once that capital leaves, it leaves. Maybe another argument that should be made, which I think is somewhat underappreciated again, is this headcount is 50 people, huh? You have 2,200 employees at Carlyle. If that AUM at Carlyle, as an example, nothing against Carlyle,

but if that AUM starts to leave, how quickly are you firing employees? What are the costs to reducing that headcount in creating synergies? There's real friction costs. There's real issues. So I think looking at this as a percentage of assets under management really is not capturing the margins and the earnings power that Persian Square is going to have here. I think if anything you, this is going to be like the visa of asset management. People are going to be really pleasantly surprised as they continue to see this over the years

that this is really a compounding machine. And as you said, generate significant cash. Look, I came into this conversation at the price. It's true, Dan. I think people would hear I had a lot of interest, although I think, I'm really getting convinced here. Let me ask you on, oh, might as well address it. Demerner. Bill is about 60, I believe.

Great investors tend to have a nice trap record of living a long time. Buffett is in his early 90s, Munger almost at 100, I believe. But there's nothing that guarantees that Bill is much fitter than Buffett. You know, Buffett's over there chug and cherry coats, and Bill is about to make a $3 billion investment into Kraft Heinz or whatever, or into Mandelaez. And his investment team takes it as go sign that the man eats two Oreos. And by the way, a little skeptical. If you can stop at two Oreos, I'm a little skeptical of me in general.

I'm rambling. But quickly on key man, risk. Like a lot of theaster locked up. But what you worry about, actually, is kind of what's happening for Malunk, right? The key man dies or steps back as ages. And then the underlings take over. And the underlains, because they don't own as much stock, their incentives, you know, the incentive issues I was talking about earlier really more because they don't have that

huge management. So how do you think of key man risk, succession? Hopefully it's a problem we don't have for 15, 25. Let's let AI take us to 45 years. But how do you think about that going forward? So those that listened, I understand the point, because Bill is this iconoclast and has cemented himself as a legendary investor. I get that.

What I think is somewhat underappreciated is how long the tenure of Ryan Israel has been there and is leading that team. the type of leadership that he has taken underneath him. He is now technically the chief investment officer. There, for those that didn't listen, when Persian Square Holdings in London, this is pre-the-IPO, had their annual meeting, huh, that was two hours of just Ryan Israel speaking, so Bill couldn't be there for personal reasons. and he was on Zoom for Q&A.

But Ryan Israel led that meeting from start to finish, understood that book backwards and forwards as a chief investment officer should to kind of go back to maybe my generation of like of the Miami Heat and LeBron and Dwayne Wade. You know, I would say that Ryan is like the D. Wade to Bill's LeBron, huh? you have, they, they compliment one another.

It's not just, it's not just Bill, huh? Jesus, I laugh at you heart, mainly because D-Wa-I mean, they were great. They won two titles together. You probably should run one-three. But, you know, what are the issues there was? Because especially LeBron had developed a three-pointer, they were so great. But they'd like, you know, it was not necessarily one plus one equals three situation. So I'm not sure.

And Dean-Weet retired before. LeBron still made. Fair, fair, fair, fair. They were retired seven years ago. Yes. I just remember that Ron when he went to the heat and just how great that team was. Look, the bigger point that I'm trying to make here is that it takes, you know, to use another saying, it takes a village, it takes a team. That team has significant tenure.

I would say, you know, without wasting the time here, I would argue, like go back, look at the presentation. you can see the tenure of that team. Ben Hakeem, who is on that team, has been there, has been there quite a long time and is instrumental in all things, you know, IPO related, in Howard Hughes, in P.S. Like, that team has a very, very deep bench and performed. And so I would say, you know, there is, there was a risk, you know, a keyman risk of Bill, huh?

And I think that that has been significantly mitigated now. If we were to lose Bill, it would be, it would be material, huh? But I think that people would be pleasantly surprised that one of the great things about PS is that if Bill were to get hit, as he says, by the proverbial pie truck, none of the capital can leave. And so you're now looking at the next generation that is stepping in and managing, you know, the 34 plus billion that maybe, that would hopefully be closer to. 100, 200 billion at that point,

moving, moving the ball forward and growing this franchise. Does he say pie truck instead of bus? Yes. I mean, at least say ice cream shop, man. Yeah, that's a good one. You know, one other thing just, when you compare to other managers,

another issue you have, and you don't have this so much at KKR, though, you know, the short sellers would tell you this. D.S.'s book is almost entirely liquid marks, right? Very liquid marks. Like, I mentioned meta. You can go look at it.

meta. You could do, I have done it before. You can do the daily nav of PSH. And they, you know, they own a lot of the stock. So maybe they couldn't realize it in a day. But they could hypothetically realize it within three days, five days. You look at a KTR. Like, you are really trusting a lot of those marks, not just on what they own on the balance sheet, but it's their marks on their funds, right? And it's not unheard of for a fund to say, hey, everything's going great. This fund's worth 100 million. Oh, yeah, we sold all the assets for 2 million. And I'm not accusing KKR, but we've seen this in the private credit space. So another nice thing here is, you can have very, very high confidence in the NAB, at least right now,

not say that won't change going forward. But two more questions and then, damn, I'm really having fun, but we started a little late, so we might have to wrap it up. Hey, just on capital allocation. So you think probably, I'm going to put words in your mouth, probably in the near term, the management fees in the capital allocation are mainly going to kind of seeding funds as they did PSUS, as they did, getting the HHS investment, but probably in the medium term, which I'll define as two to four years,

this becomes a dividend payers, kind of how you think about that. Yeah, I would say, yeah, I would say we believe that they will grow balance sheet cash, but we do think that in the medium term, huh, there will be a very large payout ratio, huh? And I would say, you know, we have to, we haven't, this is our, that's our current view, huh? Let's wait until their first earnings call, because I fully expect that that's, going to be question number one is what is the capital allocation policy? And I fully expect that

the company will give guidance at that point. And okay, that makes a whole sense. And then question number two, you know, I think a big question for this to really work, a 100% year as I mentioned earlier would help, but they're going to have to launch new funds. What do you think the new fund launch schedule? Obviously, we don't know. But like, what do you think the highest priority target is? and when do you think they'll make headway on that? So I actually would push back just a little bit. I would say for this to really work, you have to underwrite that they're going to continue to compound

at 15 plus percent of year. That if they do that alone, that certainly to us, certainly supports the current valuation that you're seeing at around 30 times. If you want to, if you want to say, okay, but I need even faster growth that I would argue needs to be over 30 times

because of the permanent capital nature. But I think that Spark is coming next. I think this team just went through, again, one of the six largest IPOs in the past decade, 20th largest IPOs in history, U.S. history, let them breathe. And I think Spark is coming next. And by the way, just to let other people on this call know, look at Spark.

Go look at the Spark filings. The Spark filings are public. We've looked, we track it. We continue to track it. Look at the legal fees. The legal fees at Spark on a quarter over quarter basis. So went from something negligible around like 50 to 100K to well over a million dollars in a 30, in a 60, 90 day period.

So in a quarter. You know, I pay lawyers as much as anybody else doesn't seize. to know that they're working on something. Well, don't we know what they're working on? Well, yeah, we know what they've offered with Universal Music Group, huh, and how they've, and how they've structured that with Spark. And it is publicly disclosed that, I think it was asked on a CNBC interview, huh, whether or not the Universal, whether or not Universal Music Group,

huh, and or Blore, Vincent Ballore has responded at all. And I think Bill's comment specifically was we would not have released that if we hadn't spoken with the French, I think was his term, or with Universal Music Group. So whether or not that does come to pass, we shall see. But I do think that it goes to show that that arrow in the quiver is probably what's next to come. Okay. That makes a little sense. That makes a little sense. man I am kicking myself because as I said if I just hit up the master and had you brush up my FRA number I I would I'll just leave it I'll just leave it with this I don't leave everybody with this before before we go because I know that we're at time huh and if anybody fast forwards to the end they should see this this is again this is roughly training around 30 times fee related earnings so okay Apollo is roughly training it around 30 times fee related earnings so who's going to grow AUM

faster. If Apollo adds, let's say, another $10 billion fund, which is not permanent, by the way, so a 10-year life fund, like 10-year deployment, five-year harvest, maybe two, two-year extensions or three-one-year extensions, that does not move the needle. You add another $2 billion fund, $3 billion fund, you've now increased AEM by 10%. I, again, I think the 30 multiple is just really undervaluing the growth that you're going to see here. You know, this is an argument in the in the violence too, right? Like, hey, compare us to our peers.

If we raise a five or $10 billion fund, it blows up our AUM versus our peers. It's like around there. Like they need to raise multiple of those every year just to sustain them. Definitely. But I'll give one last for check. Kisos is trading out and discount that Navy right now. PSH is trading a discount at any of you right now. HHS is trading a discount to whatever.

it's hard to say NAB, but it's trading a discounted NAP. He just pressed a lot of hands and kissed a lot of babies to get pieces off the round with $5 billion, and the target was 10, right? So I think the one probably fair pushback would be, hey, without a big win in the near term, it seems kind of tapped out on the fee raising side, right, right now, right? Like, I doubt they're going to launch another 5 to 10 billion fears. I would say tapped out on. the offering that was piece us.

But I think that there's certainly demand, I think there's certainly demand for a Persian square asymmetric. I know that we're going to invest in that, in that offering. I mean, we have to see it, but I think, you know, our inclination is to invest in that offering,

huh? With that, with that said, huh? With that said, you, I would say, you say that he, a lot of people say, you know, $10 billion was the target. and he only raised, and he only raised five.

And I'm putting air quotes heavily around only raised five. Okay, he only raised the largest closed end fund of all time, at five. If he had raised 10, it would be double that. So putting things into context here, I think is somewhat important. To say that he had to really struggle to get to the five, huh? I think anybody would have to struggle to get to five. It is the largest closed-end fund of all time and two times larger than its closest peer.

So just putting into context here, I think while maybe 10 was like we were hoping for 10, realistically, I think five was fantastic. Five's a great outcome, huh? No. Look, this has been super helpful. Look, I was, I'll be honest. Again, I think you'll hear,

I'm not crazy skeptical of P.S. but I was skeptical of the price, but as you just start doing all the math that you laid out so clearly and think about the optionality. And I had to push back the one, the place I'd probably push back hard is, there were some place I'd disagree with you.

The place I'd probably push back hard is you said, hey, this needs to compound at 15% per year from here to work. I don't think, I honestly don't think so. And obviously, both of our numbers are without any future asset raises. Like, I think if this does, S&P numbers underneath, if PSH, PSUS, if they do S&P 500 like numbers underneath,

I think PS is going to, it starts to look very interesting, very quickly. Well, yes, because it should deserve at least an S&P 500 multiple, at that point, which is roughly around what, 20, 25 times. This has been awesome, James. Any last thoughts or anything you want to hit before I first off? No, I always love chatting with the Andrews. So, it was great to talk. This is great. And again, just the stuff you've done in Clos and Fulz is McGrath.

All right. James, we'll have you back on soon to talk. There's plenty of other clothes and funds out there. We'll talk soon. Everybody. Bye. A quick disclaimer. Nothing on this podcast should be considered an investment advice.

Guests or the hosts may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial advisor. Thanks.