Ackman sells stake in AIG, calls it a mistake

SAN FRANCISCO, Nov 14 (Reuters) - Hedge fund chief William Ackman told investors this month he made a mistake buying the stock of troubled insurer American International Group Inc and has now sold out his interest.

In a 16-page letter to investors in his Pershing Square Capital Management, Ackman wrote that the company's 33.1 million share investment in AIG -- 1.2 percent of the company -- had been a mistake.

'We ultimately concluded that the return on invested brain damage from this investment exceeded the probability-weighted opportunity for profit, and we decided to fold the tent,' he said in a letter, of copy of which was obtained and made public by DealBook in The New York Times.

'We sold our stock and incurred a modest loss to the funds.'

The stake was taken on Sept. 30. These days the U.S. government has a nearly an 80 percent stake in the insurer and Ackman generally shies away from such companies.

In his letter, Ackman said he sold holdings in Sears Holdings Corp, Canadian Tire Corp Ltd and Austrian Post because the companies each had controlling shareholders.

He said one of his company's important competitive advantages is the ability to force change at companies.

'Other than in special circumstances, we do not expect to make investments in controlled companies in the future,' he wrote.

(Reporting by David Lawsky; Editing by Andre Grenon) Keywords: ACKMAN AIG/ (E-mail [e-mail] [phone]; Reuters Messaging [e-mail]) COPYRIGHT Copyright Thomson Reuters 2008. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.