Hedge fund warning puts skids under Man shares

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The Independent Online

RAB Capital, the recently floated hedge fund manager, sent further jitters through the sector yesterday when it admitted it had experienced a disappointing second quarter due to difficulties in spotting trends in global markets.

RAB Capital, the recently floated hedge fund manager, sent further jitters through the sector yesterday when it admitted it had experienced a disappointing second quarter due to difficulties in spotting trends in global markets.

Shares in RAB fell 15 per cent to 31p. Investors were also nervous about Man Group, the UK's largest quoted hedge fund company, which saw its shares drop 7 per cent to 1,272p.

RAB said the start of the year had been very profitable, but "the second quarter was a difficult time for the hedge fund industry as a whole. RAB Capital was no different and we experienced a disappointing quarter".

Hedge funds - which were able to make double-digit returns as a matter of course in the volatile trading conditions of the past few years - have recently become stuck in markets doing very little.

Some funds have also struggled because of the rising interest rate environment in the US and UK. Several which borrowed money to invest have been forced to unwind positions quickly after lending parties asked for repayments because the cost of borrowing is increasing.

Philip Richards, chief executive of RAB Capital, said: "We have lots to do in the second half, but we're still well ahead of where we were this time last year."

RAB floated in March at 25p a share and has grown its assets under management to $1.5bn (£833m), on which it earns annual management fees of 1.5 per cent. Hedge funds, however, make most of their profits from performance fees, which in many cases have been in negative territory in recent months.

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