UPDATE 2-Ackman's fund off 17.3 pct for year, erases banner gains from 2014

(Updates firm's assests under management )
By Svea Herbst-Bayliss
BOSTON, Feb 24 (Reuters) - Billionaire investor William
Ackman has managed to erase his entire 40 percent return of
2014, a performance that put him at the pinnacle of the hedge
fund world.
Ackman's Pershing Square (N:SQ) Holdings portfolio has lost 17.3
percent so far in 2016, the fund told investors on Wednesday.
Added to last year, when it lost 20.5 percent in a relatively
flat year for markets, the fund's declines are now greater than
its 2014 gain.
Valeant Pharmaceuticals (N:VRX) VRX.TO , which was Ackman's main
loser in 2015, was also to blame for this year's drop. Valeant's
stock declined 16 percent from Feb. 17 through Tuesday amid
questions over its earnings, providing the final bit of fuel for
Ackman's fund to burn through its gains.
Valeant, which has been part of Ackman's portfolio for only
a year, on Tuesday said it would restate earnings after having
prematurely accounted for some revenue, news which drove the
stock to pare recent losses.
Pershing Square Capital Management, which now oversees $12
billion, did not detail exactly what caused its most recent
losses and a spokesman declined to comment.
For investors who got in before the 2014 gains, Ackman's
record remains strong with his flagship Pershing Square
International fund still earning an average 12 percent a year
over the last decade.
"Long term, Bill Ackman has still made a lot of people a lot
of money and they will likely stick with him, having known that
a ride with him can be pretty up and down," said one long-term
investor.
For clients who added money after 2014, helping Pershing
Square's portfolios grow to roughly $20 billion, the story could
be more nuanced.
Ackman, one of the industry's most prominent activist
investors, said in January that redemption requests had been
modest late last year when losses were already piling up.
So far, activist investors are performing roughly in line
with the average hedge fund, which lost an average 3 percent in
the last 12 months, data from Hedge Fund Research show. In the
same period, the broader stock market had bigger losses, with
the Standard & Poor's 500 index down nearly 9 percent.
Despite lackluster returns, investors continue to put money
into hedge funds, saying they are performing relatively better
than many other asset classes including stocks.
Renowned for his brash investing tactics and unwavering
self-confidence, Ackman adopted a new tone in his most recent
letter to clients, saying he entered the new year humbled and
having learned a number of hard lessons.
"In 2016, we would like to generate results that reinforce
the confidence side of the equation. Humility and skepticism
will help get us there," he wrote.