Bill Ackman's largest fund is trailing the S&P 500 by more than 20 percentage points this year, but his management company trades at about 100 times projected 2026 earnings.

Pershing Square, Ackman's investment company, is up 6.5% in Wednesday afternoon trading to $57.01 after a recent run-up from the high $30s in early September.

The stock looks richly priced based on earnings, revenue, and assets at a time when alternative asset managers like industry leader Blackstone have come under pressure in a choppy stock market.

Pershing Square declined to comment.

Pershing Square Inc. went public in late April in conjunction with the IPO of Ackman's $5 billion U.S. closed-end fund, Pershing Square USA, when Ackman offered shares of the management company as an inducement to buyers of the closed-end fund.

JonesTrading analyst Jason Weaver cut his rating on Pershing Square stock to Hold from Buy on Tuesday after the stock blew past his price target of $42, which he withdrew. He also noted Ackman's weak investment performance and declines in other alternative-manager stocks.

Of the 10 analysts covering Pershing Square listed on Bloomberg, only one has a Buy rating, and the average price target is $43, well below the stock's current price.

Ackman is having a year to forget on the performance front. His largest fund, the European-listed Pershing Square Holdings, a closed-end fund with about $13 billion in net assets, was down 9% through Sept. 22 based on its net asset value. It reports performance weekly.

That is more than 20 percentage points behind the S&P 500 index and marks one of Ackman's worst years of relative performance over the past two decades. The fund is now behind the S&P 500 over the past one- and five-year periods but ahead of the index over the past 10 years.

Pershing Square Holdings' U.S.-listed shares (ticker: PSHZF) are down 24% this year to around $49, a steeper decline than its NAV, as the discount to net asset value widened to about 36% on Sept. 22-near its widest point in recent years.

Ackman runs a concentrated portfolio of blue-chip stocks, and some are in the red this year, including Uber Technologies and Brookfield. Fannie Mae and Freddie Mac, two other holdings, are sharply lower this year. His funds also hold Amazon.com, Microsoft, and Meta.

Ackman's new U.S. fund, Pershing Square USA, also is trailing the market, with its NAV down about 2% since late April, leaving it about 10 percentage points behind the S&P 500. Its shares have fallen sharply to around $37 from the IPO price of $50 as the discount has widened out to more than 20%.

Closed-end funds like Pershing Square USA and Pershing Square Holdings issue a fixed number of shares, and their stock can trade at a discount or premium to net asset value based on investor demand.

Pershing Square Inc. runs the two closed-end funds and handles the investments for Howard Hughes Holdings, a real estate company that Ackman is trying to turn into a mini Berkshire Hathaway through the growth of an insurance company that it purchased earlier this year. Pershing Square gets a base fee of about $15 million annually from Howard Hughes plus incentive fees based on gains in Howard Hughes' stock price, now around $72.

Pershing Square Inc. is now valued at more than $22 billion, roughly equal to the company's fee-paying assets under management as of June 30.

The stock now fetches more than. 100 times projected distributable earnings of 52 cents in 2026 and more 50 times estimated 2027 distributable earnings of 97 cents a share. Distributable earnings is a common profit yardstick for alternative asset managers. It also trades at about 70 times its annual base fee revenue of about $300 million.

These valuation levels are far above those of other alternative asset managers. Industry leaders Blackstone and KKR are valued at about 10% of their assets under management, with Blackstone trading at 19 times distributable earnings and KKR at 15 times 2026 earnings.

There also is key-man risk with Pershing Square since the firm is so closely associated with Ackman, who is 60.

Investor Jim Chanos tweeted critically about Pershing Square Inc. on X in June when the stock traded in the low $30s.

"Can someone explain to me why $PS, Pershing Square's management company at a $12B mkt cap, trades at 50% of fee-paying AUM, 40x revenues and 150x Operating Earnings, when its closed-end funds($PSH.LN and $PSUS) trade at massive 20-30% discounts to NAV...?!"

Barron's wrote skeptically about the management company at the time of the IPO, but the stock has since moved much higher.

So why does Pershing Square Inc. trade at such a high valuation?

The company has some of the highest margins in the industry, including a net profit margin well above 50%. Pershing Square has a small staff of a few dozen employees. Investors also may be betting that the firm's performance will improve, allowing it to earn performance fees on the European fund, and that Howard Hughes stock will appreciate.

Then there is the opportunity from new funds that Pershing Square may launch, including a venture fund that would hold private companies. Ackman discussed the venture fund on the second-quarter earnings conference call.

There also is a thin float in the stock because Ackman and other Pershing Square insiders owned about 75% of the shares at the time of the IPO, with Ackman's stake above 40%. Short interest in the stock was recently below one million shares.

Since investors can't redeem shares of the closed-end funds, the base fee income stream is relatively secure, distinguishing Pershing Square from other alternative-asset managers. That's a plus.

Ackman laid out the investment case for the stock on the August conference call.

"What's interesting about this company is that if we never raise another investment vehicle, we just sit with basically the three permanent capital vehicles we have today," Ackman said.

" So this business will grow at a very high rate is our expectation because the underlying companies in which we've invested in, we expect will compound at a very high rate over time."

Investors who want to align themselves with Ackman should consider buying the discounted shares of his two closed-end funds, rather than the richly priced management company.