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DATE
Nov. 3, 2026
CALL PARTICIPANTS
- Head of Corporate Investor Relations - Jill Chapman
- Chief Executive Officer and Chairman - William Ackman
- Chief Investor Officer - Ryan Israel
- Media - Fran McGill
TAKEAWAYS
- Non-GAAP Management Fees -- $75.6 million, increasing 14.7% from $66.0 million due to the addition of Pershing Square USA (PSUS) management fees following its April initial public offering.
- Fee-Paying Assets Under Management -- $23.0 billion, representing a 3.2% sequential increase from $22.3 billion in the second quarter of 2026.
- Net Income Attributable to Pershing Square Inc. -- ($19.9 million), compared to $155.5 million in the prior year quarter, reflecting unrealized investment losses and increased non-cash compensation expenses.
- Fee-Related Earnings -- $63.7 million, growing 12.7% from $56.5 million in the third quarter of 2025 as management fee growth outpaced the increase in operating expenses.
- Distributable Earnings per Share -- $0.12, declining from $0.14 in the prior year quarter primarily due to the impact of corporate income taxes following the firm's conversion to a corporation.
- Fee-Related Earnings Margin -- 84.2%, improving from 82.3% in the same quarter last year as the firm lapped one-time non-recurring costs.
- Total Assets Under Management -- $32.8 billion, a 0.9% sequential increase driven by $836 million in market value appreciation across the portfolio.
- Permanent Capital Percentage -- 98%, reflecting the firm's focus on closed-end funds and vehicles that are not subject to standard investor redemptions.
- Pershing Square Ventures Target Size -- $500 million to $1 billion, representing the initial capital goal for the new vehicle expected to launch in the first quarter of 2027.
- Uber Earnings Growth Projection -- 25% or higher, based on management expectations for annualized earnings per share growth over the next three to five years.
- Restaurant Brands Operating Profit Target -- 8% annually, which the company reported it has successfully achieved over the last several years.
- Restaurant Brands Unit Growth Forecast -- 5% per year, reflecting the franchisor's ability to expand global footprint using third-party capital.
- Fannie Mae and Freddie Mac Holdings -- More than 200 million shares, representing a material concentrated position that management believes holds tenfold valuation potential.
- Cash and Investments -- $939 million, including $663 million in Howard Hughes (HHH) shares and $80 million in Pershing Square Ventures investments as of Sept. 30, 2026.
- Economic General and Administrative Expense -- $50 million annually, representing the baseline cost structure management expects to grow nominally with inflation.
- Vantage Premium Scale -- $1.2 billion, representing the current scale of premiums written by the Howard Hughes insurance subsidiary.
- Howard Hughes Management Fee -- $15 million annually, consisting of a base fee plus a variable component of 1.5% on market capitalization above a $66 inflation-adjusted floor.
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RISKS
- Ackman stated, "These stocks are down 60% this year on disappointment that the President has not moved forward or made really any announcements," referring to the negative performance of Fannie Mae and Freddie Mac.
- Ackman indicated that he worries about the high probability of a "very significant cyber incident" and noted the firm has not yet found an efficient way to hedge against such frightening events.
- Israel noted that "people are concerned about kind of AVs and the impact that they have on Uber's business," identifying the potential for autonomous vehicle competition as a market overhang on the stock's valuation multiple.
SUMMARY
Pershing Square Inc. (NYSE:PS) reported its third quarter 2026 financial results, emphasizing the transition of Howard Hughes into an insurance-led holding company and the scheduled launch of Pershing Square Ventures. Management indicated that the firm's organic growth is primarily driven by the long-term compounding of permanent capital and the opportunistic introduction of new investment vehicles. The company reported a strategic shift within Howard Hughes' insurance subsidiary, Vantage, which involves reallocating capital from real estate assets into the insurer and pivoting the investment portfolio toward short-term Treasuries and common stocks to minimize interest rate risk.
- Ackman stated, "Actually, what really matters is the progress of the underlying companies," noting that concentrated portfolio performance is the primary driver of the firm's asset value.
- Israel indicated that Uber trades at approximately 16x earnings, which he described as the "lowest multiple the company has ever traded at in its history as a public company."
- Management expects to file an N-2 form for Pershing Square Ventures in the coming weeks, targeting an initial capital raise of $500 million to $1 billion for a public launch in early 2027.
- Ackman indicated that the firm's version of an asymmetric hedging entity would be structured as a U.S. Treasury money market fund, using 4% interest income as a budget for tail-risk investments.
- Management noted that the firm's compensation expenses are largely handled off-balance sheet through promote structures, keeping public company general and administrative costs predictable.
- Israel stated that autonomous vehicles are likely to serve as a complement to existing ride-sharing networks, as providers such as Tesla or Waymo will require high utilization rates that Uber's demand network can provide.
- Ackman described Restaurant Brands as a high-margin, capital-light royalty business that pays an attractive dividend of nearly 4% while trading at 17x earnings.
INDUSTRY GLOSSARY
- AUM: Assets Under Management, representing the total fair value of assets managed by the firm.
- DE: Distributable Earnings, a non-GAAP measure used to assess performance and amounts available for dividends.
- FPAUM: Fee-Paying Assets Under Management, the capital base upon which the firm earns management and performance fees.
- FRE: Fee-Related Earnings, which highlights earnings from recurring management fees and preferred performance fees.
- N-2: An SEC filing form used by closed-end management companies to register as investment companies and offer shares.
- Permanent Capital: Capital invested in vehicles where investors do not have the right to redeem or withdraw funds at will.
- Vantage: A specialty insurance and reinsurance company acquired by Howard Hughes to serve as its core insurance platform.
Full Conference Call Transcript
Operator: Hello, and welcome to Pershing Square's Third Quarter Earnings Call. I will now turn the call over to Pershing Square Head of Corporate Investor Relations, Jill Chapman.
Jill Chapman: Thank you, Jeanne. Good morning, everyone. Welcome to Pershing Square's Third Quarter 2026 Earnings Call. Joining me today are CEO and Chairman, Bill Ackman; and CIO, Ryan Israel. Yesterday, we issued our earnings presentation and letter to shareholders, which are available on our website at pershingsquareinc.com under the Investors section. We expect to file our Form 10-Q after market close on Thursday, October 5. Before we begin, I'd like to draw your attention to the legal disclaimers at the end of our earnings presentation. Today's call may include forward-looking statements, which involve risks and uncertainties and are not guarantees of future performance.
Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors described under forward-looking statements in our earnings presentation and our IPO prospectus filed on April 30. We do not undertake any obligation to update forward-looking statements. We may also reference non-GAAP financial measures in responses to questions. Reconciliations are included in our earnings presentation available on our website. Finally, please note that nothing on this call constitutes a prospectus, an offer to sell or a solicitation of any offer to purchase our common stock or any interest or security in any Pershing Square fund or securities of any other person.
Furthermore, nothing on this call constitutes investment advice or an invitation or inducement to deal in securities. And now I'd like to turn the call over to Bill.
William Ackman: Thank you, Jill. Welcome to the call. So we begin each quarter the night before delivering a very, I would say, comprehensive letter about the quarter, and we try to focus on what we think the most significant developments are plus a quarterly presentation. And the goal there is to give us as much time to answer questions from the investor and analyst communities. We do this in 2 parts. We have an hour kind of traditional earnings call. Part 2 open very broadly to the full shareholder universe. You can follow along on Part 2 or just stay on this call, and we will address your questions.
Why don't we begin -- I would say just a high-level sort of thought. What's unusual about Pershing Square versus other alternative investment managers is all of our assets today are publicly traded. Our capital base is permanent. What that means is there is volatility in our AUM driven by just mark-to-market changes in the value of the underlying stocks in our portfolio. Actually, Ryan came up with a very useful construct to think about our business. Why don't you just talk about -- it's kind of summarized in the letter, what the message we're trying to convey to shareholders.
Ryan Israel: Yes, sure. So as we wrote in the letter, ultimately, given the permanent capital nature of our business, while we will raise occasionally some new funds, it will be very additive to our fee-paying assets under management. The bulk of our growth, what we call our organic growth is ultimately going to come from the returns that we generate over time. And for the vast majority of our capital, what we are looking for are businesses with a high degree of certainty where we can predict out over the coming years and decades, what those businesses will look like.
And we're trying to curate a portfolio of really 12 to 15 of the world's great businesses from what we think are several hundred that we closely track, where we believe when we purchase these businesses, we'll be able to earn at least a 20% rate of return over a multiyear period of time. And if we do that and we're correct, then ultimately, our assets will grow in a similar proportion to the returns that our underlying businesses earn. And when you decompose that, the way that we actually think about how do we earn in general, that 20-plus percent rate of return, there are really 2 components to it.
The first and the most important part of how we will ultimately achieve those returns is what the businesses can perform. And that ultimately relates to their earnings growth over time. And so we're really seeking businesses that can grow, generally speaking, with a high degree of confidence, anywhere between 15% and 25% a year. It's exactly what we have when you look at our portfolio of about 15 companies that we own today. Secondly, where we will get a little bit of an added return, we hope over time above what the business itself can grow at, which we view as a proxy for the growth and the value of the business is multiple expansion.
So investors, when they assign a multiple of earnings to a stock, we try to buy those businesses at a time in which people are questioning whether the business can continue to perform either at the past levels it has or they're trying to evaluate some future uncertainty that has arisen today and what the resolution will be. We develop a perspective where we believe the business is likely to perform at a continually strong level or an improved level in the future.
And we believe we are buying that business at a time in which people are questioning the future business prospects perhaps, and we can buy at a discounted multiple to what we think the business will ultimately be worth once the clouds are a little bit clear and the sky is a little bit clear, if you will. And that should be additive to the returns of the business itself. And so the combination of those 2 factors, buying some of the world's great growth companies and then buying them at attractive or discounted valuations are likely going to deliver that more than 20% return that we're looking for, which will be the core driver of our business going forward.
And that was really what we tried to bring through in the letter at a very high level in terms of the concept as well as thinking about our portfolio overall as really sort of a subsidiary of a holding company that's comprised of 12 to 15 subsidiaries where each investment itself can try to deliver those 20% returns primarily through the earnings growth. And what you're seeing in our fee-paying assets under management will be the collective results of all of those businesses.
William Ackman: Again, one other thought comparing us to other alternative managers is that the focus with -- I know the Apollo call may be finishing up soon is really going to be on realization events because that's a big driver of incentive fees. And then the progress of fundraising and new funds. In our case, what really matters is the progress of the underlying companies. How are our underlying businesses doing because ultimately, that will lead to increases if we've done a good job in the underlying value of the company and therefore, the assets that we manage over time. With that intro, why don't we -- actually, let me cover one other topic of significance.
One of the most important developments of the quarter was the progress we made with Howard Hughes. We -- just before the end of the second quarter, we closed the transaction that Howard Hughes acquired Vantage, a specialty insurance and reinsurance company. And then we did -- we were very fortunate in that Marc Grandisson stepped up to become Executive Chair of that company. We were fortunate in being able to recruit David Gansberg to be CEO of the company.
And then Marc spent the last 4 months building out what we believe to be the best insurance team in the industry with a company at a very tiny scale, but a company that we're going to work to grow the insurance part of Howard Hughes very rapidly by taking capital out of our real estate subsidiary and injecting it into the insurance operation.
We've made very good progress on the management part of that story, and we are full speed ahead on the monetization part of the story, but we expect Howard Hughes to become really an insurance-led holding company to be able to think about this business over the next really months to going into next year as we put more and more capital into the insurer. I mentioned that story because it's really today an immaterial part of the revenues of Pershing Square Inc. We get a base management fee of $15 million, but we get an upside management fee of 1.5% of the market cap of the company.
We create in excess of that what was originally a $66 floor that grows with inflation. As we make business progress, we expect that stock to re-rate. Today, it trades at a significant discount to kind of its -- think of it liquidation value. As a high-returning insurance company, it should trade at a multiple of that underlying intrinsic value. So very good progress, and I think more to report there as we make progress. Let's go to questions.
Operator: [Operator Instructions] Your first question comes from the line of Craig Siegenthaler with Bank of America. [Operator Instructions] Your next question comes from the line of Dan Fannon with Jefferies. Your line is open. Please go ahead.
Daniel Fannon: So I guess, Bill, I wanted to follow up on the last kind of comments you made around Howard Hughes and the insurance opportunity. Obviously, that's a very competitive market. So I was hoping you could talk to Howard Hughes's right to win in this type of environment where rates are obviously moving higher and there's, as you said earlier, a quite competitive environment.
William Ackman: So I'd say a few things. One, we acquired Vantage because it's a diversified platform. It participates today in a couple of dozen lines of insurance. And Marc is actually going to expand the number of kind of markets in which the company competes. It's also a very small insurance company today with a relatively modest amount of capital, which means we can pursue the opportunities that are kind of interesting pockets of opportunity in insurance markets and find profitable places to do business. I would say Marc is quite encouraged about the opportunity set as he sees it. In terms of rates, if you're referring to interest rates, obviously, if policy rates are going up, that's good for insurers.
If interest rates are going up, that's generally bad for insurers. What we did is within days of acquiring the company, we sold Vantage's entire kind of fixed income portfolio and replaced it with a less than 90-day short-term treasury portfolio. So there really is no interest rate risk embedded in Vantage. And we took the sort of excess capital, the -- once we set aside capital equal to the float in short-term treasuries, we took the chunk of the balance, and we've invested in a common stock portfolio where we've actually made meaningful progress. That portfolio is up, I think, something like 6% since we made the investment. So we've made good progress on the investment side, right?
If you think about a fixed income portfolio, had Vantage kept the portfolio they were in over the following 4 months, it would have lost meaningful value. We've increased the value of the portfolio by the approach that we've taken. But one of the benefits of being a relatively small company bringing in a management team of this kind of credibility is Marc brings not just acumen, but relationships and ability to recruit talent and therefore, an ability to see business that we wouldn't have been able to see without Marc at the helm.
Operator: Your next question comes from the line of Kenneth Lee with RBC Capital Markets.
Kenneth Lee: Just one on the PS Ventures fund vehicle. Maybe just talk about some of the next steps and perhaps time frames when you could start seeing that launch.
William Ackman: Sure. So next steps for us are, one, we will likely file in the next few weeks an N-2, which is the kind of SEC form that we filed for this launching a vehicle like this one. There'll be a lot more detail in there. There'll be some detail on kind of the initial portfolio companies. We are likely to launch a private placement kind of financing for that company with institutions. So we raised some additional equity capital prior to launching this as a public company. We'll begin that process shortly thereafter. Once we get through the SEC, which is probably a couple of month process, we'll sort of pick our moment to launch that vehicle.
But I would say Q1 is a good target for the inception of that as a public company.
Kenneth Lee: Great. Very helpful there. And just one follow-up, if I may. As you look at your existing investment portfolios, which holdings or which investments do you see having the most potential upside or longer-term growth opportunities there?
William Ackman: So the investment we own that has the most upside is Fannie Mae and Freddie Mac. These stocks are down 60% this year on disappointment that the President has not moved forward or made really any announcements. There was a lot of excitement last year. Stocks went up basically eightfold from the time the President was elected and then have declined very significantly. But the businesses have continued to perform extremely well. Capital has been restored to levels that we believe the business has already been released. It's something that I think the administration did not want to spend any time on or getting the headlines before midterms.
The fear of just even a discussion about Fannie and Freddie could possibly increase mortgage rates, which would be a negative for obviously, midterm elections. The Treasury Secretary has said -- this is something to be addressed in the balance of the President's term. So that's the investment that has the most upside, and it is material. We own more than 200 million shares of both -- of the 2 companies combined. We believe the stocks are trading at a small fraction. These are 10x potential.
The rest of the portfolio also offers very significant potential over the next couple of years, but it's a double, if you will, over a several year period of time as opposed to a 10x. But in terms of individual names, I mean, Ryan, do you want to highlight that?
Ryan Israel: Yes. I think kind of using that framework of earnings growth and multiple expansion, when we look across the portfolio, while clearly, everything that we own today, we're very excited by. Otherwise, we would have found something else that we were more excited by that we could have purchased. One name that I will call out among the kind of core holdings, if you will, is Uber. Now Uber is the fastest-growing business in our portfolio. We kind of put in the letter that we think the company should have sort of a 25%-plus earnings per share growth over the next 3 to 5 years.
And if that company were valued at a multiple that we believe we were correct today, then you would think that if we're right on the earnings per share growth of that 25%, that would sort of have a kind of 25% rate of return over that period of time over the next kind of 3 to 5 years, which would actually be better than that kind of double that we would expect from the portfolio as a whole. And interestingly...
William Ackman: And that's before there's any adjustment to the multiples. Yes.
Ryan Israel: Exactly right. Interestingly, Uber actually is a company that trades at one of the lowest multiples in our portfolio despite having the highest amount of growth over the next 3 to 5 years. It's about 16x earnings, which is the lowest multiple the company has ever traded at in its history as a public company. And we believe that, that is misplaced. It's really reflective of kind of 2 fundamental risks. One is people are concerned about kind of AVs and the impact that they have on Uber's business. And the second would be kind of this more agentic commerce kind of, if you will, the Muse-like agentic agents that book it.
In both of those scenarios, we've done a lot of work and continue to do a lot of work over this investment, which we've now held for close to 2 years. And we believe that both of those things may actually make Uber's business stronger for the simple reason that in different ways, they both actually expand Uber's addressable markets, which would allow for faster growth without causing any disruption to what we believe are some very strong moats around the business.
And so in short, if Uber can grow its earnings about 25% a year and the multiple can expand from 16x to something that is significantly in excess, Uber could be one of our best investments that we have made in a long period of time in the core portfolio.
William Ackman: Another way to think about that particular opportunity on kind of a shorter-term basis is kind of if you take analyst estimates, I think there's a lot of consensus the earnings will grow about 35% over the next 12 months. If you own a stock at 16x earnings and it stays flat for the next 12 months and earnings grow at 35%, it will be trading at something like 12x earnings 12 months from now. I just think the probability of that is extremely small. So that's -- ultimately, businesses tend to -- intrinsic value is like a tether. The business gets pulled to intrinsic value over time unless there -- unless we're wrong on intrinsic value.
Actually, I think it might be a useful spending a couple of minutes just talking about how we -- the big overhang on Uber stock today is the perception that Tesla will just take over the world. It basically be an autonomous vehicle player or possibly 2, and people will go to the Tesla app as opposed to use the Uber platform. What's our argument against that?
Ryan Israel: Sure. So the main risk has historically been Tesla using AVs. And increasingly, some people are concerned that perhaps Waymo, which is a subsidiary of Google, may be building up its own fleet. And ultimately, the concerns relate to the fact that these companies have the ability to create their own unique cars, and those cars will create an own network, and therefore, people won't need to go to the Uber app in order to get rides, but rather they'll go to these AV players directly and those AV players will not partner with Uber.
Our perspective is that at the end of the day, Uber has access to significantly more vehicles and drivers than Tesla and Waymo and really the collective aggregate of any AV companies that are to come could ever have. And if you think about this from a rider's perspective, riders really care about 2 things. One is they care about having a quick ride show up at their door and second is they care about a reasonable cost.
The fundamental problem in these supply-demand networks is that you need to have as much supply in terms of cars as you can possibly have in order to make sure that riders are able to get good prices and the riders are able to get them quickly. And so the way that we sort of think about it is, ultimately, AV will be a complement, but not a substitute for human drivers because there are just way more human drivers than there could ever be AV cars. And what that means is that it's in the best interest of Tesla and Waymo in order to partner with Uber over time to make sure that their vehicles get better capacity.
One thing that's important to think about is that from Waymo and Tesla's perspective, it is very expensive to build these cars. And therefore, you want to make sure that these cars have high utilization rates. And so joining a network where you can make sure that somebody is riding in your car for a significant number of hours per day is very important to ultimately earning reasonable returns on capital.
There are some additional elements in terms of thinking about differences in technologies, which may or may not be as close to fruition and making these vehicles widespread and regulations and other things in terms of just logistical issues about how do you clean the cars, how do you charge the cars, how do you make sure if someone loses something, you can actually get back to them where Uber's logistical capabilities are very important. But at the end of the day, it's about making sure these cars are best utilized, which we think means the existing network with enormous amounts of supply and demand is where everybody sort of wins the most.
And if we're right about that, longer term, you could envision a scenario where more people are taking cars. The population that is using rideshare today in terms of the number of miles that's driven is close to 1% or 1.5%, something like that. And we think that, that figure could grow pretty meaningfully over time if we can have more cars available at lower prices to people. And so we think that, that ultimately means Uber has a very valuable role to play in that network longer term.
But people are concerned about competition mainly because Tesla and Waymo are in select markets where we think it's the easiest for them to prove their concept are working in some markets independently and haven't yet partnered with Uber in Tesla's case. And then in Waymo's case, have partnered with them in some markets and not others. But based on all the work that we've done as well as just sort of our view about how the future is likely to evolve, we think it's very likely that Uber's role continues to remain important, and we think that the market growth is going to be even higher than what we and many people expect in the future.
William Ackman: Just to add to what Ryan is saying, it's not -- demand for mobility is not constant. There are peaks and valleys. You need to be able to serve the customer at peak, obviously, when they're going to work in the morning, coming home in the evening, Saturday night, Friday night, think sort of New York City to build -- you can't economically build an autonomous vehicle fleet large enough to handle those peaks and deliver a good customer experience and have it earn an economic return on investment. One other interesting fact on Uber is people talk about it almost entirely as if it's a mobility business and approximately half the business today is food delivery.
If you value the food delivery where sort of the comps trade, today, you're paying almost nothing for the kind of core mobility business. So an extraordinarily cheap stock. And it's worth actually -- I would say most alternative asset management companies wouldn't go deep on any particular company in their portfolio because it's not that relevant. In our case, a concentrated portfolio drives the ultimate value of this portfolio. And we have realization events on a real-time basis because we mark-to-market the portfolio every day, and we get paid based on mark-to-market performance. Let's go to the next question. Operator?
Operator: Your next question comes from the line of Dan Welden with Wells Fargo.
Daniel F. Welden: I wonder if you might review what a structure for a future asymmetric fund could look like. So talking about the return profile in a steady state outside of big events. And then like how do you think about that opportunity set right now? It feels like we're in a time of big change and big tail risk. But how do you assess when the moment is right?
William Ackman: Sure. So we envision -- so our version of an asymmetric hedging type entity would look like a U.S. treasury money market fund. We invest the capital in short-term U.S. treasuries. And the interest income, which today is something in the, let's say, 4-ish percent would be our budget for the asymmetric investments. So we design in effect, a fund where you can't lose money because your principal is protected by treasuries. If you spend 400 basis points over the course of the year and you earn no return on that investment, people's capital is protected.
So we like that kind of structure as opposed to a so-called tail risk fund where you raise a smaller amount of capital and over time, it burns up and goes to 0 unless the world ends. This, we think, is sort of a much better model. In terms of the -- what we're looking for our big bets in this respect, and they tend to be actually relatively small amounts of capital, but they're big notional bets have been in cases where we've had a view of a black swan type event, I think financial crisis, COVID crisis or massive inflation spike in the 2021 time frame that would cause the Fed to raise rates.
We basically identified these as potential risks and then looked for an instrument that offered us an asymmetric payoff that justified some of the uncertainty associated with any of these kinds of bets. We used the beauty of credit default swaps is that there's no premium -- you don't pay a premium for volatility. So they're sort of volatility neutral. So it's really just a contractual bet on an outcome. The negative with interest rate swaptions is it's very dependent on the level of vol in the market as to whether the payoffs are large enough.
The closest we came to putting on one of these bets in the existing portfolio was, I would say, late last year or early this year when we said, look, it's likely that we're going to have some kind of war in Iran. That's going to lead to a spike in oil prices. Is there a way to hedge that event in a way that made sense. And the problem was that the rest of the world was aware that there was a likely war in Iran that would lead to higher oil prices. And also because of the uncertainty, volatility was high. So we looked at a number of potential structures.
And if you got it precisely right, you might have made 3x your money if you brought a 1-month oil option and you had a friend in the administration who leaked to you they were going to war. I mean that would be the best way to make money there. So we did nothing. We have nothing on today. We think -- we spend a lot of time thinking about risk, geopolitical risk, political risk. There are things that we worry about. I worry about AI. And I think the probability of a very significant cyber incident is -- we've been saying for a while, you're starting to see pretty significant cyber events.
A bunch of military bases have their refrigerators turned up to 100 degrees. It doesn't sound -- sounds a little bit scary, but not entirely frightening. I think we're going to have some other frightening events. The problem is we've not yet identified an efficient way to hedge that kind of outcome. And generally, volatility is generally very high. So in terms of our launching a vehicle like this, I think we'd like to -- our first focus is on Pershing Square Ventures. We think that it could be a very successful entity and something we want to do first.
My preference on the asymmetric fund would be to do it after the next big win we have, but we could certainly choose to do that later next year. So that's still an open question. But it's sort of a very unusual fund and that it's something you don't need to think about. Think about it as your money market account and getting a decent yield while you wait. And then every once in a while, we're going to put capital to work and do hopefully make a big pile of money for investors.
Operator: Your next question comes from the line of Craig Siegenthaler with Bank of America.
Craig Siegenthaler: So our question is on Howard Hughes. I heard your commentary that you expect very rapid growth and expect to add more insurance lines. Can you unpack those comments? How do you expect to grow liabilities? What specific insurance lines are you referencing in those comments? And what are your competitive advantages as you expect to gain share from established players?
William Ackman: So first, I think importantly, we're not under pressure to grow. What we do want to do is put more capital into Vantage so we have the flexibility to choose risks. The beauty of the model here is we expect to earn ultimately kind of higher returns on the asset side of the insurer than the liability side. And so we're happy to -- we're going to pick and choose and Marc and his team will do the same, the risks that they want to underwrite and they want to sort of take on. In the meantime, we'll be deploying the asset side of the balance sheet in investments that can compound at high rates over time.
But Ryan, do you want to add to that?
Ryan Israel: Yes. And Craig, I'm not going to front-run Marc and give away any competitive secrets that he's working on, but I'll give you a little bit of a flavor for sort of how we think about the growth at Vantage at a high level. So Vantage has more than 2 dozen individual business lines where it can write. And I think one of the differences being inside the business versus sort of an outside-in perspective is people talk about pricing in the industry as if it were one single price. And really, every individual market in which Vantage competes at several dozen has its own pricing system. And there are some markets where pricing we actually believe is quite attractive.
There are markets where pricing is unattractive. And so I think to Bill's point, we're going to try to focus our areas where there's a lot of attractive pricing growth. One of the nice things about Vantage's small scale is if you're a small player in the market overall and then you have several different business lines, you can actually move the needle on attractive areas pretty quickly. How do you do that? Well, one of it is that you can take your existing team where we have businesses that are at smaller scale, and we can use that in order to write a lot more business.
And that can happen pretty efficiently with insurance because if you offer a price that people are willing to accept that you think is a good price and they agree, you can grow your business pretty quickly as long as you have the amount of capital. The second way you can do it, though, is you can move into adjacent lines where you're looking at one type of business and you think that there may be a market that would be a different customer set or a different industry, but the same type of business, you can go hire a new team to be able to start in that business.
And it's easier to do that when you're writing on order of magnitude, $1.2 billion premiums than if you're kind of a very large company writing $12 billion of premiums. And so we have that sort of lack of a large business to really help move our growth when we decide to expand in these areas.
The third opportunity, though, and this is where I think Marc is really helping move the needle as well is we're a small company where we have been able to hire good talent, but I think Marc is taking that to the next level where we can bring in some really incredible names to oversee some of the larger businesses that we could ultimately build over time where they've worked at very large companies where they've built these really incredible businesses. And now because of Marc's reputation and experience in the industry, they're willing to come work for us at Vantage, and they can really replicate those things.
And the way I sort of think about the business at a high level is you have the insurance business, the primary insurance, where a lot of my comments are that ultimately, you need to establish new teams that are close to the markets, you need to work in new divisions. And then you have the reinsurance business where it is much more it's much easier to write large amounts of business when you really want to move it aggressively because you think the price is right. And you can actually do that without having to hire incredibly large teams.
And so I think we have on both sides of the business, the ability to really pick our spots, but those spots that we pick can really move the needle on both the insurance side as well as the reinsurance side. Next question please, operator.
Operator: Your next question comes from the line of Edmundo Yépez with Armada Capital.
Edmundo Yépez: Hi, Bill. Hi, Ryan. My question goes around Restaurant Brands and why it merits portfolio inclusion. I haven't done a profound work in the name, but it seems a relatively lower quality business when you compare to the rest of the portfolio just because of more aggressive competitive dynamics, more operational complexity. And at least for now, it seems that the EPS growth comes in a high proportion from the buyback. So -- and there's also, I believe, a restructuring turnaround component, which makes me think that the IRR threshold should be higher.
So what's the rationale of being a high single-digit percentage of assets since it seems that the core driver of the [ TCPs ] is more multiple driven than growth for now.
Ryan Israel: Yes. Thank you, Edmundo, for your question. It's a really good one. I think what's really interesting about your question on why we own Restaurant Brands is a lot of what you described is correct about the restaurant industry in general. The reason why we like Restaurant Brands, though, is because it's a franchisor. And so a lot of the complexity, a lot of the capital intensity really sits with the ultimate operator and owner of each individual restaurant box. And what's nice about Restaurant Brands is it owns a collection of 5 different companies at scale where it is the franchisor. So they are not the ones operating the business.
They're the ones collecting royalties by having built the brand and then recruiting the actual owners who are day in, day out running those businesses. And so the result of that business model is one that has very high margins. It's very capital light, really looks like that royalty-type company that Bill and I talk a lot about that we're seeking to find. And there's an enormous amount of growth for these types of businesses around the world, we can grow with other people's capital. So Restaurant Brands across its different collection of individual brands has the ability over time to grow at about a 5% rate.
It's growing a little slower than that as they repositioned a few of their businesses, but the management team is very confident that they'll be able to ultimately return that to about a 5% level of growth. And that's really, in our view, 5% growth that doesn't require $1 of capital that could be very accretive to earnings.
One of the things that's important to us when we talk about the types of businesses that we want is to have a business with a high degree of confidence, which we think a royalty business like Restaurant Brands is, also to have an element of growth, which we think the unit growth story that I just outlined provides, but also the management team. So one thing that's important to mention here this business has recently attracted over the last handful of years, one of the 2, I would say, best restaurant industry executives of all time, which is Patrick Doyle.
If you go study the history of Domino's, it's one of the most successful turnarounds under Patrick's leadership really in the 2010s and has been sort of emblematic, I think, of the success that a lot of restaurant companies would like to achieve. Patrick in the last several years has joined us as the Executive Chairman of Restaurant Brands and is really helping imbue a lot of the success factors that he had at Domino's and the Restaurant Brands itself. And so what we've seen since he has joined is a company that's been able to reposition its business to even have more success.
The company actually has laid out a framework where they believe they can grow their operating profit about 8% a year, which they have been successful in achieving in the last several years. They also think that they're going to be able, as you mentioned, to continue to buy back shares, which we like. They pay a very attractive dividend, nearly 4%.
And when you add all that up, we think we get a relatively low-risk, high return on capital, high-margin business with great leadership that should be growing its kind of earnings per share and including its dividend at something around a 15% rate, trading for only 17x earnings, which we think is a multiple that is very low in light of all the factors that I just mentioned. So we've owned this business for a while. It's been a successful investment over our period of ownership. It's actually one of the businesses that we've owned the longest, but we continue to be really excited by it and how they're making the business better and the leadership of the company.
Edmundo Yépez: Is there an index inclusion initiative on your side because it's not like the peers like or whatever are part of the S&P. Is there like a push from your index? Or is that part of the...
William Ackman: Yes, it's definitely something we spent time with management and management certainly understands the opportunity today, I mean, we believe among the reasons why Restaurant Brands is a cheap stock, it's not in the major indices because it's nominally a Canadian domiciled company. Fundamentally, the company is really headquartered in Miami. And we do think there is an opportunity for the company to be eligible for listing in major indices. Now in the meantime, companies is compounding in value. They're actually buying back some stock. They'll be able to be more aggressive in buying in shares once they achieve their ambition of being an investment-grade company. So we think it's a good story.
Stock has been largely flat for a bit too long, but a lot of that has been driven by really multiple compression while the business continues to compound. So we think those lines cross in a good way over the next several years.
Operator: Your next question comes from the line of Mike Brown with UBS.
Michael Brown: I wanted to ask on Pershing Square Ventures. You gave a Q1 target for the public launch there. Maybe just unpack a little bit more there as we think about maybe the economics of Pershing Square Ventures, what's the right framework we should consider in terms of that initial capital base, fee structure and then the potential earnings contribution once the vehicle is up and running? And then maybe just talk a little bit about like the philosophical approach to investing there. What are you kind of focused on doing in the venture space?
William Ackman: Sure. So we're going to start out with an entity management and the Pershing Square will contribute a couple of hundred million of assets into the vehicle. That sort of -- we always like to have a significant stake for the company. We will likely raise some additional capital in a private placement format. We haven't yet determined what that number is, but it could be a couple of hundred million dollars. And then we will take it public and raise a few hundred million dollars. I think the vehicle -- our goal is not to come out of the gates too large.
So I would say $500 million to $1 billion is probably a good benchmark to kind of high and low size. In terms of the business model, it's going to be a closed-end investment company, a so-called '40 Act entity. We're going to charge a 2% fee, but same as Pershing Square USA. And it will be the lowest cost way for a public market investor to get access to some really great private businesses. The bulk of the capital would be invested in companies that are private but have really proven business models are scaling revenues very rapidly, have a clear path to profitability and some names that you've heard of.
And then we also have some earlier stage, very interesting companies. Basically, what we did is we took the -- I've been an active venture investor for 16, 17 years. The team kind of reviewed sort of my personal portfolio and they picked their favorites. We're giving kind of the best of my venture investments plus investments. We mentioned in the presentation, we're approaching $100 million of capital deployed recently and some pretty interesting investments. The good news is that founders want Pershing Square as an investor. So I would say there's probably no deal that we won't be able to get access to.
And we're meeting with teams and companies and thinking about how we can be a value-added investor to them to justify the opportunity to invest in some really interesting private companies. So figure $500 million to $1 billion, let's assume it comes into existence by the end of Q1. And there's some pretty interesting companies in there that people are excited to own. And then we have some pretty interesting ideas about how we're going to take this entity public in a manner that benefits all of our most loyal investors. So we'll have more news on that when we make the filing for this entity, which I think is in a week's time frame.
We haven't precisely determined the date.
Michael Brown: Okay. Great color. Maybe just -- maybe one for more of the model here...
William Ackman: Let me just add one more thought to that. So while this entity is starting small, the beauty of Pershing Square Ventures is it will grow its value NAV over time with obviously the -- if we're right and we've done a good job in selecting good companies, these are businesses that have much higher growth rates than companies we invest in traditionally. So business value can grow more quickly. These businesses -- bulk of the capital are going to be invested in companies that are more likely to go sooner -- public sooner rather than later. And so we get the benefit of the compounding of the underlying assets.
And I think because of the scarcity, the public market investor today one of the disappointing things for a public market investor, a typical retail investor is while SpaceX is an amazing company, their first chance to invest in SpaceX was about $180 billion or so, $1.7 trillion valuation. They would have loved to invest at $100 billion valuation. Well, we're going to -- our goal is to find the next SpaceXs and give the retail investor, the public market investor and really even institutional investors the opportunity to access those companies.
I believe that will enable Pershing Square Ventures to trade well, i.e., trade at a premium to its underlying NAV, and that also gives us the flexibility to raise additional capital. So the vehicle we expect will grow with compounding, much like our existing vehicles, but also with the potential to raise capital that we can then deploy. So while it will start out at something less than $1 billion in scale, we think it can actually grow reasonably quickly to become an important contributor to the profitability of Pershing Square.
Michael Brown: Okay. Great. Yes. So I just wanted to ask on the expense side, just for the model here. The expenses came in lower than we were expecting this quarter, and this is your first full quarter as a public company. So maybe how should we think about your G&A growth from here into 2027? Just any guidance there would be helpful.
Ryan Israel: Sure. Thanks for the question, Mike. So I think as we try to point out in the letter, important thing to think about for the third quarter and also for the fourth quarter is that we are lapping some costs in last year's third quarter, and we'll also do the same in the fourth quarter, where we had ultimately some severance costs we prepared as well as some signing bonuses and other things and some costs that we incurred even on the G&A side in order to position ourselves to go public.
And so while we have had, as we talked about in the Q2 letter, some additional growth, both in terms of headcount as well as kind of new public company costs, I would say, in this quarter, with our expenses down 1% and I think for next quarter, it's possible you'll have something kind of similar in terms of year-over-year growth rates. That's really just reflecting the fact that we have these lapping from prior year expenses. I would say, as we move into '27, we will not have nearly as much of those lapping expenses.
And so you'll start to see some of the increase in our cost structure that was really -- we think about as more onetime that's come in for the additional headcount and some other public company costs, but that's been a little masked in the third quarter and will also probably be masked to some degree in the fourth quarter.
William Ackman: Yes. I'd say just very high level, the vast majority of our expense is compensation expense. But because of how we've structured Pershing Square, those -- that compensation expense is almost entirely off balance sheet, right? So we've -- the public company G&A, the true economic G&A is something in the order of $50 million a year. We think that grows nominally with inflation. But the -- if you will, bonus and incentive compensation really is coming off of the promote compensation that we've kept off balance sheet. We -- again, the public company receives the incentive fees in the first 5 percentage points of return and management is paid with the incentive fees on returns above 5%.
And that model, the attractiveness of it, it makes both our -- it makes our expenses -- you're not going to be shocked about what our expenses are each quarter. It shouldn't be a meaningful surprise. And because of the nature of the business and the mark-to-market nature of the underlying assets and the fact that our funds are all public, at the end of the quarter, you should be able to calculate our revenues with a pretty high degree of accuracy. So I don't expect -- while there was a little bit of a surprise, if you will, here, on our expenses being lower than expected, and that kind of surprise is never a bad one.
Once we get through the kind of public company lapping of some costs related to -- when we went public, I expect there shouldn't be much in the way of surprise with respect to our expense structure going forward. And if there's something of significance, we'll let you know about it.
Operator: There are no further questions at this time. I will now turn the call back to Bill Ackman for closing remarks.
William Ackman: Thanks so much for joining the call. It sounds like we did a good job of the letter and that we answered a lot of the questions in advance, and we gave us a lot more time to answer questions from analysts and investors. At 10:30, we have Part 2. The call is open to really anyone who wants to ask a question. And how does one ask a question? Fran, why don't you explain?
Fran McGill: Sure. You can ask a question by dialing in using the details on Bill's pinned post on his Twitter. The details are also available on the Pershing Square Inc. website. And also, you can reply to my tweet. We'll be monitoring that and building up a bunch of questions.
William Ackman: That's right. We're doing it this way because we had some technical challenges last quarter respond to questions directly on Twitter, but this will be broadcast on Twitter, and also we welcome your questions live. And we'll see you at 10:30. Thank you.
Operator: This concludes today's call. Thank you for attending. You may now disconnect.
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