UPDATE 1-Pirate Capital blocks investor exits
(Adds background, detail)
NEW YORK, Sept 11 (Reuters) - Pirate Capital LLC, a hedge fund group known for taking activist stances in its investments, has suspended investor redemptions on two of its four funds, citing "market turmoil," according to an Aug. 31 letter to investors.
Pirate, which is managed by former Goldman Sachs trader Thomas Hudson, said it blocked investors from exiting its Jolly Roger Activist Fund LP and its Jolly Roger Activist Offshore Fund Ltd., the letter obtained by Reuters stated.
"In view of the activist nature of the funds, prior redemptions, market turmoil and their effect on the funds' individual positions and portfolios as a whole, we determined the best way to manage the positions is through the special investment designation," said the Norwalk, Connecticut-based fund.
It said the designation means that "positions will not be subject to redemption" and will be "closed to new investors."
The letter didn't disclose performance figures or assets under management for any of its funds.
Typically, when a fund manager suspends redemptions, it means that investors are bailing out so rapidly that the fund is forced to sell positions at fire-sale prices to meet redemption demands, which can destroy returns.
It listed its stock holdings at $478.9 million as of June 30, down from about $1.5 billion last September, according to a regulatory filing.
Pirate, like other activist funds, is known for taking large positions in companies and agitating for change. However, that strategy has suffered in recent months as the prescription often demanded by activist investors - a company sale - has been thwarted by a downturn in the mergers and acquisitions market.
As of June 30, Pirate's largest positions were in security company Brinks Co. (BCO.N) and auto chain Pep Boys Manny Moe & Jack (PBY.N), according to a regulatory filing. Both stocks declined in July and August, but it is unclear when Pirate bought the stocks.
The firm is currently running a proxy battle to get representation on the board of Angelica Corp. (AGL.N), prompted by what it said was the company's "dismal operating results." Pirate owns about 9.8 percent of Angelica, according to regulatory filings.
Pirate last September was rocked by a spate of staff departures, some of whom went off to form a new fund called FrontFour Capital Group. In response, Pirate said it closed the funds to new investors and said it would seek to regain "positive performance."
Pirate has had strong performance in the past. The fund recently disclosed that its flagship Jolly Roger Fund LP, an event-driven fund, was up about 195 percent from inception in July 2002 through July 31, 2007.
"This action has no effect whatsoever on the onshore and offshore event driven funds," a spokesman said.
(Reporting by Dane Hamilton)
