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RAB Capital Restructures Troubled Flagship Hedge Fund
UK-listed hedge fund business RAB Capital, which recently announced that its co-founder was stepping down from his chief executive post to focus on reviving the fortunes of its flagship fund, said it was restructuring the portfolio and offering investors lower fees in return for their not pulling out money for three years.
Instead of paying a 2 per cent annual fee and 20 per cent performance fee on The Special Situations Fund, which fell by 22 per cent in August, investors are being offered a deal to pay 1 per cent and 15 per cent respectively. In return, they will not be able to withdraw funds between 1 October 2008 and 3 October 2011. The only strategy affected by this adjustment is the Special Situations product, RAB said in a statement on its website.
By 1 September, the Special Situations fund had fallen to $923 million, a drop of 48 per cent since the start of this year.
Philip Richards, the lead manager of the fund, said: “We are very disappointed by the performance of Special Situations in 2008 and greatly regret the impact that the performance will have on investors.”
Earlier this month, Mr Richards quit his position as chief executive to concentrate on management of the Special Situations fund and other investments.
Many hedge funds have suffered client pullouts and poor returns since the credit crisis erupted a year ago, either because their strategies failed to cope with the unexpected spike in volatility, or failed to forsee the scale of the collapse in value of credit products, or because they did not anticipate the recent reversal in the bull market for some commodity prices, such as oil. However, data shows that some hedge funds, such as short-biased strategies, have earned robust returns this year.
Private bankers and analysts have told WealthBriefing that investors must read the fine print of hedge fund prospectuses to see whether fund firms can exercise clauses in the fine print of any contracts to halt redemptions in times of financial stress, or impose significant penalties on clients looking to pull out.
Such clauses can be exercised even if a fund does not come with an explicit lockup contract and normally offers the chance to exit at frequent intervals, such as once every 30 days.
