Hedge fund managers to share in £25m pot at RAB Capital

Updating the market on its 2005 performance yesterday, the group said it expected pre-tax profits for the year to be up 43 per cent on the previous year, coming in at more than £25m. The company's manager-bonus pool is roughly equivalent each year to its pre-tax profits.

The jump in profits means Philip Richards, the chief executive, is in line for an enormous payout of £7.5m for the year. He is the highest-paid chief executive of a quoted company.

The results come at the end of a year in which many hedge funds struggled, with a record number collapsing.

RAB said it had managed to buck the trend through a series of fund launches, and excellent performance from its managers. The group's overall average fund return was 11 per cent, compared with an average return of 7 per cent across the industry.

Mr Richards said: "This is a good result despite some challenges in the past year. Having reinvested in the business, we are well placed to achieve sustainable growth in the future."

Overall, turnover for the group was up 49 per cent to £54m, while total assets under management were up 50 per cent to $2.62bn (£1.48bn).

Mr Richards conceded that another year of 50 per cent growth across the business was unlikely, highlighting that the company had invested heavily in its infrastructure over the past year - a move which had helped to strengthen its performance.

Marc Popiolek, a spokesman for RAB, said the group was ready to make another acquisition if the right opportunity came along. It is believed that the company would be prepared to buy something bigger than the £250m of assets it acquired through its purchase of Cross Asset Management.

Mr Popiolek said a priority would be finding companies which complement the company's existing operations, and give it access to markets in which it does not operate.

The group said Cross had made a positive contribution to earnings since it was bought last summer. However, it said costs across the group had risen because of the numerous fund launches, accounting changes and infrastructure spend.

Commenting on the results, Geoff Miller, a senior analyst at Bridgewell Securities, said: "The numbers were pretty much in line with what we were expecting. We have marginally increased our profits forecast to just above £25m and are holding our overweight recommendation."

In spite of the good news, shares in the company fell almost 4 per cent yesterday, closing down 2.5p at 60.5p, which gives the group a market value of £252m.