Passport Liquidating Materials Fund

Jul 11 2012 | 1:39pm ET

Passport Capital is pulling the plug on its six-year-old materials fund, which has lost almost one-third of its value this year.

The Passport Materials Fund is down 31% this year after losing 17% in the second quarter, it told investors in a letter this week. Over the past 12 months, the fund is down 45%, cutting its return since inception in March 2006 to just 6.6%.

Passport said it expects to return about 75% of the fund's remaining assets to investors on or about July 15. The other 25% will be liquidated "over the ensuing month," fund managers James Cunningham and Sebastien Boifort wrote.

The letter was obtained by Bloomberg News.

The Materials Fund's portfolio includes 14 private investments accounting for 62% of its assets. Cunningham and Boifort said that "the privates in the portfolio are taking longer than expected to achieve liquidity, making it impractical to expect liquidity from the privates to increase trading capital in the near term."

The fund's three largest private investments are Ferrous Resources, Satimola Ltd. and Canadian Sinosun Energy. Passport marked down its investment in the former by 24% in the second quarter, while a bid to acquire Satimola has recently seen its value reduced.

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