New crisis could force RAB Capital to delist
Thursday 12 May 2011
Rab Capital, the former star hedge fund now notorious for investing in Northern Rock, is set to leave the stock market following a fresh wave of redemptions and the departure of a top fund manager.
The company said yesterday that its assets would drop further than expected and that returning to profit would now be a greater struggle. The board will decide whether to delist its shares from the Alternative Investment Market (AIM). The shares fell by 24 per cent to 7.75p in response to the news. At their peak in 2007, the shares were worth 126p.
RAB revealed in March that its one-time flagship Special Situations Fund would pay out 79 per cent to investors after it was hit by a wave of redemption requests. The company said at the time it had enough liquid assets to pay the money.
But yesterday RAB announced that redemptions had spread to other funds and that Gavin Wilson, who runs the high-performing RAB Energy and Octane funds, would leave "for personal reasons".
"As a consequence of these redemptions and events, and their impact on both the level and anticipated growth of assets in these strategies, overall assets are likely to move to a level below management's previous expectations," RAB said in a statement.
Yesterday's news could mark the end for a business that was once the star performer of London's hedge-fund scene during the pre-crisis boom. RAB's Special Situations Fund made billions for investors before 2008 by riding the commodities boom and investing in mining start-ups.
But it suffered losses during the recession on unlisted shares in businesses that had yet to float. The real turning point for RAB was the decision by the Special Situations Fund's manager, Philip Richards, to buy a stake in Northern Rock after the bank said it was running out of cash.
Mr Richards believed the shares would recover with Bank of England support but instead Northern Rock was nationalised, which had the result of wiping out his investment.
RAB never shook off the doubts that lingered after its punt on Northern Rock and Mr Richards, who gave away £3.25m, or nearly half his earnings, to Christian causes in 2006, became a reluctant emblem for the credit crunch.
Delisting the shares would give RAB the time to re-organise itself with less public scrutiny. The company said yesterday it was considering using some of its surplus capital to provide liquidity to shareholders.
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