RAB Capital, the troubled London-based hedge fund, yesterday agreed to sell its Asian business as it tries to shore up its finances.
The fund manager, which on top of the general woes affecting the industry has made wrong calls including buying shares in now-nationalised lender Northern Rock, said it was selling the assets and business of its loss-making Northwest brand for £1m to its original owners, at a big book loss. As recently as last June, RAB valued Northwest at £20m. However, the sale will allow the fund manager to save between £3m and £4m in costs annually, and a spokesman said that after tax adjustments the writedown would be closer to £9m.
Northwest's assets under management, held in three funds, were approximately $300m at the end of December. On a pro-forma basis, the business and assets it is selling generated pretax profit of around £9m in 2007, but analysts believe Northwest may have slipped into the red last year.
RAB said it would continue to do business in Asia, where it also sells products, including those branded under the Pi Asia Fund. It also said the sale would not materially affect its trading position, though it does marginally improve its liquidity. "The cash consideration will be allocated to general working capital purposes," a spokesman said.
Hedge funds have suffered as the economic downturn has eaten into investments and clients have withdrawn money. Many also borrow heavily to boost returns, and with banks and investors calling in their cash, some hedge funds have had to close trades at bad times to repay them.
RAB is the latest in a series of hedge funds to pull back from recent expansions and sell operations in the Far East. Asia-focused funds suffered their worst ever year in 2008, underperforming their peers in the West. A rival, Citadel, founded by industry luminary Kenneth Griffin, shut its Tokyo office in December and cut staff throughout Asia.
The move is also the latest retrenchment by RAB, which in November closed down 12 hedge funds after inOctober banning investor withdrawals from its flagship energy fund.Reuse content