02/10/2008

Investors commit to struggling RAB

RAB Capital has won a crucial vote to save its struggling flagship Special Situations strategy.

As part of the restructuring plan, investors agreed “by a considerable margin” to tie their money up for three years and in return RAB is halving its management fee to 1% and is also cutting its performance fee to 15%, from 20%.

The restructuring is aimed at ensuring the long-term stability of the strategy so as to provide a better prospect for the generation of value in the underlying investments,” RAB said in a statement.

Previously investors could withdraw their money quarterly after giving 180 days’ notice.

The deal, announced earlier this month, comes in response to the fund’s poor performance after bets on small-cap mining stocks and British bank Northern Rock went wrong.

The freeze is RAB’s attempt to insulate itself against the expected deluge of withdrawals from hedge funds after their dire performance this year is expected to prompt a flight to the safety of cash.

RAB needed to secure the deal before Tuesday because this was the final day for investors in many hedge funds to file requests to redeem their money by end-December. The total assets under management of the Group as of 25 September 2008 were estimated to be $4.2bn.