Complex tax treatment for U.S. Investors - similar to a K1 is what explains most of the discount to NAV. I dont believe you can buy this in an IRA, and in a taxable account - you are hit with complex filings. Does anyone have a good view on this??
I would push back a little that it "explains the discount". Pershing Square came public at NAV and was sold to international investors and US investors aware of the complex tax treatment. There are many similar funds in the UK/Netherlands that don't trade at such a discount. Would it help close the discount if these things were not in place? Absolutely! Ackman's brand is stronger in the US.
As has been said, this is a PFIC and should not be owned in a taxable account unless you want to make the requisite filings. there's no question there.
I own the ADR in an IRA of an accredited investor. The IRA is not a rollover IRA, such that it can not be considered "ERISA" assets, as from my read, you potentially shouldn't invest ERISA money in PSH because it isn't registered with the SEC.
Can you own a PFIC in an IRA? the answer to that, in my opinion, is YES.
There are other potential issues. Which ones are you thinkin about specifically (UBTI? Foreign withholding tax? etc?).
Owning the ADR helps with some foreign holding reporting requirements. I don't think one could argue purchasing PSH = a "prohibited transaction".
PFIC:
https://www.lexology.com/library/detail.aspx?g=833d6ea6-ecaa-4210-a9d4-90b1fcf008ff#:~:text=General%20rules&text=As%20a%20result%2C%20for%20instance,subject%20to%20the%20PFIC%20rules.
First, the Final Regulations modify the definition of shareholder as announced by the US Treasury and the IRS in Notice 2014-28, whereby a United States (US) person shall not be treated as a shareholder of a PFIC to the extent such person owns PFIC stock through a tax-exempt organization or account. This effectively extends the exemption that was already afforded to the tax exempt organization under the temporary and proposed regulations to the US shareholder(s) of such organization, and expands the exemption to encompass tax exempt accounts as well. As a result, for instance, a US person owning stock of a PFIC through an individual retirement account (IRA) described in Section 408(a) will not be treated as the shareholder of the PFIC stock, and in turn, is not subject to the PFIC rules. Because Notice 2014-28 originally provided for the aforementioned exemption, it will be effective for the taxable years of US persons who own stock of a PFIC through a tax-exempt organization or account ending on or after December 31, 2013.
https://www.ey.com/Publication/vwLUAssets/US_persons_holding_PFIC_stock_through_tax-exempt_organizations_or_accounts_will_be_exempt_from_Form_8621_filing_requirements/$FILE/2014US_CM4364_US%20persons%20holding%20PFIC%20stock%20through%20tax-exempt%20orgs%20to%20be%20exempt%20from%20Form%208621%20filing%20reqs.pdf
I would note that an SEC registered mutual fund does own PSH NA. Perhaps they file the PFIC stuff on behalf of the underlying investors.
https://matissefunds.com/total-returns-for-period-ending-63014/facts-and-reports/The brokerages themselves are split on the issue
https://www.barrons.com/articles/how-to-buy-bill-ackman-dan-loeb-on-the-cheap-1458970084In the U.S., individual investors often need to be “qualified”—that is, have substantial income and liquid net worth—in order to buy hedge funds. The Ackman and Loeb funds, in contrast, can be purchased through many brokerage firms, including Merrill Lynch and Fidelity, without restrictions. Charles Schwab allows purchases with some restrictions, but Morgan Stanley allows only qualified investors with a net worth of $25 million or more to buy the two funds, as they aren’t registered in the U.S.
