RAB Capital started in 1999 with one hedge fund – RAB Europe – and two partners Philip Richards and Michael Alen-Buckley. Mr Alen-Buckley is...

RAB Capital started in 1999 with one hedge fund – RAB Europe – and two partners Philip Richards and Michael Alen-Buckley. Mr Alen-Buckley is now executive chairman of one of only two listed hedge fund managers in the UK with 15 single hedge funds and 2 fund of funds, one internal and one external as well as several UCITS 3 regulated retail funds.

The two original owners now have around 55 per cent of the company which is capitalised at around £410 million and counts ex-Conservative Chancellor of the Exchequer, Lord Norman Lamont amongst its non-executive directors.

Mr Alen-Buckley talks to WealthBriefing about the development of the business and the plans for the future.

From RAB's extensive offices in London's Adam Street, Mr Alen-Buckley, previously head of international sales at ABN Amro and director of institutional sales at Merrill Lynch, tells WealthBriefing that, although the company made one major acqusition last year was one of consolidation.

“In 2005 we hired many new staff to give us a very solid infrastructure base for our future growth. This included a new company secretary and new chief operating officer as well as senior marketing and distribution staff. We're now around 100 strong and we've grown by around 50 per cent in the last 18 months or so,” he said.

“We are keen to grow but we want this to be on a very firm footing, with good corporate governance and a rigorous business model. We're keen for the business to flourish in the long-term, and that is our commitment, ” he continued.

As for current performance, assets under management are currently $4.06 billion compared with $3.2 billion just two months ago, and up 55 per cent since 31 December 2005. This is such a rapid increase that the company was recently obliged to make an official announcement to the stock exchange.

“Much of our growth has been, and will continue to be generated through the performance of our funds. A major part of our strategy is also to launch new funds and we are keen to find excellent managers who can work to a large extent autonomously but using our platform”.

“We see ourselves as being very innovative with our funds, but also with our business model. RAB gives gifted managers the right environment in which to thrive. Compensation is very much weighted towards performance. Base salaries are capped at £100,000 for everyone (including the executive chairman) in the business.”

“We're also looking very closely at other asset classes that we think will be of interest to our investors. Property and private equity are obvious examples, but we are also considering more involving in the Far East and emerging markets as well as more fixed income investments. We are also looking at developing structured notes.”

Inevitably, RAB is also looking at acquisitions. Last year the company acquired Cross Asset Management, for £9.5 million in cash and shares, adding $250 million in assets under management and two more open ended funds. In the last year or so RAB have looked at some 23 projects and will perhaps take one or two forward in the next couple of years, according to Mr Alen-Buckley.

“Any new acquisitions are likely to paid for, at least to some extent, in deferred consideration. This tends to give shareholders the best value and gives us the best chance of attracting the right people into our business. We do have a strong balance sheet, though, with around £90 million in cash or cash equivalents at present”.

So how does RAB Capital distribute?

“We're looking at a number of distribution channels at the moment. We've just finished a series of briefings with private client stockbrokers around the UK. Private banks are also very much on our radar as a distribution channel. We're also trying to reach out to retail businesses,” he said.

RAB has hitherto concentrated on its in-house distribution team which is delineated on product lines. Each marketeer is a “product champion”.

Recent marketing efforts have taken sales staff to some of the less obvious places, such as Latin America and the Middle East. In Japan, RAB is working with a local distribution partner to penetrate the local institutional market.

“In our business model we are striving to emulate what the likes of New Star, Perpetual and Jupiter have done in the retail space – having strong products backed up a strong distribution network.”

When asked about the pros and cons of RAB's 2004 Aim listing, Mr Alen-Buckley was characteristically upbeat.

“The listing served to align all the interested stakeholders in the business. As well as strengthening the balance sheet with a £12 million injection, it has raised our profile and given our managers who have equity stakes much more tangible liquidity than can be provided by an unlisted company. I believe that our listing also gives us more feedback from investors.”

“However, on the flip side, I now spend much more time on house keeping and governance issues than before the listing”.

RAB Capital counts amongst its shareholders four significant ultra high net worth family groups, including Mittal and Sofina, the finance arm of Solvay, the Belgian chemical group, after the RAB founders sold 14 per cent for approaching £29 million last June.

When asked about RAB's investment philosophy, “we are aiming to produce equity-like absolute returns with bond-like volatility. If you look at the performance of our funds, you'll find that we're achieving this,” Mr Alen-Buckley claimed.

“For instance, our flagship fund, RAB Special Situations, run by chief executive officer Philip Richards, which at the moment is heavily invested in natural resources, has recently come top of a Marhedge ranking table as the best-performing hedge fund bar none globally over the past three years. It has an unrestricted remit to invest, and since inception in January 2003 the Special Situations fund has increased 41 times, with a maximum monthly draw down of 10.9 per cent.”

Sadly, this fund is now closed, but there is an AIM-traded RAB Special Situations closed-end investment company that mirrors the fund.

“We also tend to close funds early – before capacity becomes an issue. For instance, we have recently closed our EMEA fund at $350 million. This was not because we couldn't trade more, but because we thought it had reached an optimal level,” he added.

As for the differences between RAB and the only other listed hedge fund manager, Man Group: “we have a greater emphasis on equities and on fundamental analysis, I also get the sense that we have a more direct relationship with our clients”.