Billionaire investor Bill Ackman just took a step closer to building a conglomerate modeled on Warren Buffett’s Berkshire Hathaway , but the success of that ambition may come down to a deceptively simple ingredient, according to analysts at Piper Sandler. Ackman this week filed to list his hedge fund holding company Pershing Square Capital Management on the New York Stock Exchange. The move came after Pershing Square boosted its stake in Howard Hughes Holdings to about 47%, seeking to reshape the real-estate company into a long-term compounding vehicle similar to Berkshire, pairing insurance-generated capital with a concentrated portfolio of investments. Piper Sandler believes the success of Ackman’s ambition will depend largely on his ability to keep insurance risk low while letting investment returns do the heavy lifting. “As Bill Ackman seeks to transform HHH into his version of Berkshire Hathaway, the secret sauce comes from keeping insurance risk low to maximize the returns of the equities portfolio,” analysts Alexander Goldfarb and Connor Mitchell wrote in a report to clients after hosting institutional investors to meet with Ackman and Pershing Square Chief Investment Officer Ryan Israel. The discussions focused on the company’s pending acquisition of Vantage Group Holdings, which is expected to provide the insurance platform that will generate investable capital, the analysts said. Ackman and Israel described a dual-track strategy in which Howard Hughes will initially seek to maximize excess cash from its master-planned communities while improving profitability at Vantage. Over time, the business mix is expected to shift meaningfully. Management said Howard Hughes could become roughly two-thirds insurance and one-third real estate within five years as investment returns become a larger driver of growth, the firm noted. But investors are likely to demand proof that the strategy can deliver, Piper Sandler said. “Management understands there will be a show-me period where legacy REIT investors mix with a hopeful influx of Berkshire-type investors with all eyes eager to see the fruits emerge,” Piper Sandler said. Ackman has often cited Warren Buffett as a key influence on how he built Pershing Square. He pointed to Buffett’s early career running private investment partnerships — similar to hedge funds — before taking control of Berkshire in the 1960s and transforming it into a permanent-capital investment platform. Ackman has said that evolution helped shape his own ambition to build a Berkshire-like compounding vehicle. Investment banking underwriters of the Pershing Square IPO are Citigroup, UBS, Bank of America, Jefferies and Wells Fargo.