Ailing London Hedgie Panicked

Date: Thursday, November 27, 2008
Author: Kaja Whitehouse, New York Post

Troubled London hedge fund manager RAB Capital is gearing up to pull the plug on several of its portfolios that invest in hedge funds, known as funds of hedge funds, The Post has learned.

The move highlights the trouble encroaching on the funds of hedge funds industry.

Among the funds RAB Capital is liquidating in the coming months is the RAB Multi Strategy Fund, a fund of hedge funds that invests solely in RAB Capital's proprietary funds - some of which have proven to be the worst performing in the industry this year.

The RAB Multi Strategy, together with its more levered version known as the RAB Multi Strategy Enhanced, manages about $200 million in assets, down from at least $400 million earlier this year.

It's down roughly 28.8 percent this year, according to a letter the fund distributed yesterday to its investors.

According to the letter, the board of directors has been working on a liquidation plan they hope will be approved by investors in mid-January.

"If the liquidation goes ahead as planned," investors will vote on it by mid-January, said the letter, signed by fund manager David Hince.

Meanwhile, RAB Multi Strategy's investors have been clamoring for basic information, such as net asset value.

The fund estimates between one-fifth and one-quarter of its assets are illiquid, the letter said.

Among the troubled funds in its portfolio include the RAB Special Situations fund, down 64 percent this year, and RAB Energy, down 56 percent this year.

Also dragging it down is the RAB Markets Cycles Fund, which got hit when Lehman Brothers went bankrupt. Lehman's European arm acted as the sole brokerage firm for the fund.