Risk Manager To Board Pirate Ship

Oct 5 2006 | 2:49pm ET

Pirate ShipPirate Capital, which has hit its fair share of stormy seas in the past few weeks, with less-than stellar returns over the summer and a slew of departures, has hired a risk-manager to join its team. Mark Smith, who has run his own risk advisor consultancy for the past three years, it set to board the ship on Tuesday, where he will be tasked with enhancing the firm’s risk management systems, according to a source familiar with the matter.

Smith, founder and president of Mark Edward Advisors—which specializes in advising hedge funds on risk management—is putting his firm on mothballs in order to take the Pirate position, said the source. Smith’s experience includes stints at Basel Asset Management, Parker Global Strategies, SAC Capital Advisors and Chang Crowell Management.

In a recent interview with FINalternatives, Smith said he thinks that scandals like the huge loses at Amaranth are another black eye for the hedge fund industry, but may serve as a wake up call for managers.

“Scandals like Amaranth are going to make all the smart guys out there start thinking about putting in additional risk management systems,” he said. “The bottom 80% of managers just want to use risk management as a marketing tool, and there are many firms out there that aren’t mature enough to listen to their risk management people.”

Meanwhile, at Pirate, the story about the departures of five of the firm’s executives has been rewritten. Hudson is now saying that two analysts he reportedly fired had actually voluntarily resigned.

In a letter to investors last week, Hudson wrote, “Later on Wednesday, I asked for the resignations of two additional analysts, David Muccia and Matthew Goldfarb,” specifically separating that pair from the three other investment staffers that Hudson said left of their own volition. But late last Friday, Pirate released a statement from Hudson explaining, “I have now become aware that both had voluntarily and independently decided to resign from Pirate Capital and that their decision to resign was without impetus from me. The letter to investors was then apparently misinterpreted by some as saying that they had been fired by Pirate Capital. This was not the case as their resignations were entirely voluntary.”


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