UPDATE 2-Ackman tells investors that this year could be his firm's worst ever

(Adds performance figures up to Dec. 15, changes dateline to
Dec. 16)
By Svea Herbst-Bayliss
BOSTON, Dec 16 (Reuters) - Billionaire hedge fund investor
William Ackman, whose funds have suffered double-digit losses
this year, on Tuesday told investors that 2015 could be his
firm's worst ever, but said clients are generally sticking with
him.
"If the year finishes with our portfolio holdings at or
around current values, 2015 will be the worst performance year
in Pershing Square's history, even worse than 2008 during the
financial crisis," Ackman wrote in a 17-page letter that was
seen by Reuters.
Investors in funds operated by Pershing Square (N:SQ) Capital
Management have asked for only a minimal amount of money back
recently, Ackman wrote in the letter, saying that the firm,
founded in 2004, was not forced to sell out of positions in
order to meet redemption requests.
Ackman's comments come less than a week after investors were
rattled by turmoil in the credit markets and as many hedge fund
managers are nursing heavy losses amid soured bets in the energy
markets. Indeed a number, including LionEye Capital and
Watershed Asset Management, have decided to sell off their
holdings and shut down.
The average hedge fund has lost nearly 4 percent this year,
according to Hedge Fund Research data.
Ackman emphasized his firm's low redemption levels.
"Our net redemptions were nominal at $39 million or 0.2
percent of capital for the third quarter, and $13 million or 0.1
percent in the fourth quarter," he said in the letter.
The firm's Pershing Square Holdings fund dropped 21 percent
in the year to Dec. 15, marking a sharp contrast with last
year's 40 percent gain when Ackman ranked as one of the $3
trillion hedge fund industry's biggest stars.
As a so-called activist investor who tends to make only a
handful of concentrated bets and then pushes management to
perform better, the 49-year old Ackman has seen much of last
year's profits eaten away as his bets on drug company Valeant
Pharmaceuticals VRX.TO and Platform Specialty Products PAH.N
tumbled in the third quarter.
Still, Ackman, who oversees money for state pension funds,
endowments and wealthy investors, said the portfolio's intrinsic
value increased even as its mark-to-market value, which reflects
the daily stock price, has declined "substantially."
Ackman said again in the letter that he is sticking with
Valeant - which surged 16.41 percent on Tuesday - saying, "We do
not believe that Valeant's long-term earnings prospects have
materially changed."
As of early November, Valeant's stock price had plunged 70
percent from its peak in August. But the stock has since
recovered some ground as Ackman and other large investors bought
more shares. In the last weeks Ackman used over-the-counter
options transactions. He said in the letter that if the stock
price rises to $165 or more by January 2017, "We will make more
than 10 times our net investment over this period."
Ackman said uncertainty surrounding Valeant - including its
drug pricing and accounting practices - should begin to
disappear on Wednesday when the company discloses what it will
likely earn next year.