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Business News

Fresh woe for hedge fund RAB as commodities fund slides nearly 20%

Worries over the US Federal Reserve easing back on money printing left RAB Capital, the hedge fund hammered by an ill-fated bet on Northern Rock, nursing fresh losses last month.

RAB's Special Situations fund, which is heavily exposed to commodities, slid 11.3 per cent in June and is down 19.8 per cent over the quarter, according to its latest update.

The manager of the fund, Philip Richards, stepped down as chief executive of RAB Capital in 2008 after founding the company with Michael Alen-Buckley in 1999. They managed several billions at the high-water mark of the business but now have a few hundred million under management.

Although the fund outperformed major mining and commodity indices in the third quarter, it suffered from tumbling gold prices and fears over slowing Chinese growth.

Mr Alen-Buckley said: "China has been slowing down and Brazil has had problems, which hasn't helped. Gold has fallen from $1,700 to $1,200, which hasn't helped. We are in a big bear market for commodities – all the commodity funds are suffering redemptions. It is an unloved sector in a bear cycle."

More than 80 per cent of the Special Situations fund's holdings are in oil and gas, base metals and gold. But gold suffered its worst quarter for more than a century between April and June.

Mr Richards said: "While momentum could see the sell-off intensify in the near term, the pull-back should provide attractive entry points for risk assets in a number of commodities, especially crude oil, copper and gold."

A disastrous bet

RAB Capital built up an 8 per cent stake in Northern Rock in what turned into a disastrous bet on the struggling lender, which was nationalised in 2008 after becoming the first victim of the credit crunch and the subject of the first bank run in nearly 140 years in September 2007. RAB launched an unsuccessful legal action against the Government over the nationalisation, along with fellow hedge fund SRM Global, which spent £50m on an 11.5 per cent stake, after an independent valuer appointed by the Treasury ascribed no value to the shares.