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RAB, the second-biggest investor in Northern Rock before the bank was nationalised, has taken radical action to try to survive the financial meltdown by slashing the number of funds it runs and locking investors into others.
As a result of the action instigated by new chief executive Stephen Couttie, the group will have $2bn (£1.35bn) of funds under management by the end of the year compared with $4.7bn at the start of September and $7.2bn at the end of last year.
It is dropping its strategic goal of attempting to build a business to attract retail investors and shutting the only one of its funds that was exposed to the collapsed investment bank Lehman Brothers. In total the funds being closed are worth about $250m.
Couttie, who was appointed to allow founder and previous chief executive Philip Richards to focus on improving the performance of funds, said: "We have taken the necessary action to focus the business and reduce its scale of operations in the context of extremely difficult conditions throughout the industry, investor deleveraging and increasingly scarce financing."
RAB provides a rare insight into the calamity facing hedge funds. Unlike many of its rivals it is forced to make public disclosures about its financial health because it has a listing on Aim.
RAB described the industry as being "under severe stress". It is closing 12 of the 36 funds it operates, which is expected to lead to a number of job losses at the firm.
The group had already locked investors into its Special Situations fund, the one that holds the stake in Northern Rock. Investors in another two main funds - RAB Energy and RAB Octane - have agreed to be locked in to try to stem the flow of redemptions.
Its funds under management had already fallen to $2.8bn by November 1 because of redemptions and negative investment performance. This includes $650m on lock-ups longer than one year and although the group insists there is evidence that the rate of redemptions is slowing, it concedes funds under management will fall further by year-end.
Shares in RAB jumped 29% to 8.4p. The group is 26% owned by Richards, who is the R in RAB, and 19.9% owned by Michael Alen-Buckley, the AB, who is the executive chairman. The pair founded RAB in 1999 after working together at Merrill Lynch.
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