Two Ackman investors want more details on JC Penney

Fri Mar 15, 2013 1:43pm EDT
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By Svea Herbst-Bayliss and Katya Wachtel

BOSTON/NEW YORK, March 15 (Reuters) - Two institutional investors with William Ackman's $12 billion hedge fund plan to reach out to the manager to get more information about the firm's big bet on ailing retailer JC Penney, whose stock has dropped 21 percent this year.

Officials with two state pension funds that, combined, oversee assets of more than $120 billion told Reuters they want Ackman to give them more information about Pershing Square Capital Management's portfolio and to say more about the long-range plan for turning around JC Penney's fashion lines.

The pension officials did not want to be identified because they had not yet set up their meetings with Ackman. The manager, whose fund is sitting on a roughly $500 million paper loss in JC Penney stock, declined to comment.

It's not uncommon for pension managers and institutional investors to seek a private meeting with hedge fund managers, especially when a big bet or a portfolio is underperforming.

The move by two of Ackman's investors is an indication that some investors are growing uneasy with Pershing Square's stake of 39 million shares in JC Penney, which the hedge fund began amassing in 2010.

"People are reading a lot about Bill Ackman these days and have questions, and while these kind of hedge funds can't speak to everyone, keeping their very largest clients informed will have benefits," said Don Steinbrugge, managing partner at investment consulting firm Agecroft Partners LLC, in Richmond, Virginia.

Pershing Square is up 3.6 percent for the year through February, compared with a 2.8 percent gain for the broader $2.6 trillion hedge fund industry.

The pension plan officials said they are also concerned about Ackman's other very large and public bet -an estimated $1 billion short position in shares of nutritional supplement company Herbalife. Ackman is betting that Herbalife will be exposed as an unsustainable pyramid scheme and the stock will collapse. He currently has a $200 million gain on that bet.   Continued...