Poster boy for the credit crunch to repay investors cash

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The Independent Online

RAB Capital has agreed to pay out 79 per cent of its Special Situations Fund to investors, leaving the former $3bn (£1.8bn) fund with less than $100m.

The fund was hit by a wave of redemptions before Monday's deadline for withdrawals. But RAB said it expected the redemptions and had enough liquid assets to pay the money.

Investors will get their money by 1 October, when emergency restrictions put in place three years ago are lifted. The fund, managed by RAB's co-founder Philip Richards, was a star of London's hedge fund scene during the boom. But an investment in Northern Rock made Mr Richards a reluctant poster boy for the credit crunch.

Soon after the Bank of England announced it would support Northern Rock, Mr Richards bought a stake as a bet that the diving share price was an over-reaction.

The fund lost its 8 per cent stake when the bank was nationalised. Mr Richards said: "We made mistakes in the run-up to the crisis and that has been a chastening experience."

The fund made billions for its investors before 2008 by riding the commodities boom and investing in mining start-ups. RAB's success also reaped millions for Mr Richards, a former army officer and an evangelical Christian. In 2006 he gave £3.25m – nearly half his earnings – to Christian causes.

The fund's core strategy was based on belief in a commodities "super cycle" driven by limited supplies of natural resources to meet demand from construction in emerging markets.

It made huge returns when companies it invested in floated but suffered losses when the global recession made investors wary of making risky bets and temporarily cut demand for commodities.

In future the Special Situations Fund will invest in listed natural resources companies and will hedge against losses instead of taking one-way bets.

Existing illiquid stakes in commodities companies are likely to be moved into another fund. RAB said the redemptions would cut revenue by about 5 per cent this year.

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