Pirate’s Summer Plunge Continues

Sep 25 2007 | 11:31am ET

Activist hedge fund Pirate Capital continued to take on water during a stormy August, as the sinking firm’s assets under management continue to dwindle.

All of Pirate’s funds were down in August—their third consecutive negative month—though last month’s losses were an improvement on the July bloodbath, according the firm’s August investor newsletter. That’s likely to be cold comfort to investors in the Norwalk, Conn.-based hedge fund’s activist offerings, both of which are down more than 20% year-to-date.

“Due in part to broader market weakness, the Jolly Roger Funds returned negative performance for the month of August,” the newsletter reads. “While we are always very disappointed with negative performance figures, our return outlook for our investment portfolio remains encouraging as with each day we move closer to seeing our investment thesis in each of our positions play through.”

Until then, investors are swimming in red. Both the onshore and offshore Jolly Roger Activist Funds were down 6.43% last month, with the former down 24.39% year-to-date and the latter 22.84%. In July, the onshore fund plummeted 18.31%, the worst monthly performance for any Pirate fund in its five-year history; the offshore version dropped 16.81%. Worse still for investors, both funds are down since their inception last year, by 16.17% and 14.65%, respectively. Pirate suspended redemptions from both funds earlier this month.

Its flagship Jolly Roger Fund and Jolly Roger Offshore Fund are not hurting nearly as much, but are still down on the year. The former shed 4.37% last month and is down 1.07% year-to-date, while the latter lost 3.98% in August and is down 7.46% year-to-date.

Due in part to the negative performance, Pirate continues to leak assets. The firm shed another $7 million between Aug. 1 and Sept. 1, and now manages just $375 million. At the beginning of the year, Pirate boasted more than $1 billion in AUM, and managed almost $1.9 billion as recently as last summer.

Unsurprisingly, given the performance numbers, Pirate had just one “treasure of the month” compared to four “shipwrecks of the month.” Included in its shipwrecks are some of its biggest and most high-profile holdings, including security firm The Brink’s Company and uniform and linen provider Angelica Corp. But the firm put a brave face on the big losses.

“We reiterate our confidence that there is substantial upside in our portfolio names, and we will continue to leverage our Board positions to unlock the value for our investors,” the newsletter—which also noted that Pirate uses no leverage—said. “We expect our core investments to appreciate significantly over time and for new investments to add incremental value.”

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