Pershing's Ackman says bond insurers to blow up

NEW YORK, Nov 28 (Reuters) - Activist investor William Ackman said on Wednesday that bond insurers were headed for a blow-up, and he continues to short MBIA Inc (MBI.N) and Ambac Financial Group Inc (ABK.N) in anticipation of a further drop in their shares.

Ackman, speaking at a conference in New York, said the bond insurers had gotten heavily involved in risky structured securities products, as opposed to their traditional base in municipal bonds.

Ackman, who runs activist hedge fund Pershing Square Capital Management LP, said he held short positions in MBIA and Ambac, meaning he is betting on their shares to drop. His short positions are in the holding companies, not the insurance subsidiaries, he said, adding that reserves at both MBIA and Ambac are inadequate in his firm's view.

The well-known activist investor, responsible for shaking up companies such as hamburger chain McDonald's (MCD.N) and payment processor Ceridian, was speaking at the annual New York Value Investing Congress.

Bond insurers' business model "does not make sense," he said. Ackman expressed concern about the level of exposure the companies have to collateralized debt obligations. (Reporting by Michael Flaherty and Megan Davies; Editing by Lisa Von Ahn)