Hedge firm RAB boosted by institutional inflows

Date: Friday, January 8, 2010
Author: Laurence Fletcher, Reuters

* Assets up $100 mln to estimated $1.37 bln

* Net inflows from institutional investors

* Shares up 4 pct at 19 pence

* Special Sits performance held back by unlisted holdings

Hedge fund firm RAB Capital (RAB.L) said inflows from institutional investors helped it post its first rise in assets in two years, as the industry continues to rebound from its biggest ever crisis.

The firm said funds under management rose 9 percent year-on-year during the second half of 2009 to $1.37 billion. It has seen its assets fall from more than $7 billion in December 2007 due to outflows and performance losses.

Chief Executive Stephen Couttie told Reuters the firm, around half of whose assets come from private investors, was seeing net inflows from institutions such as pension funds, which have tended to stick by hedge fund investments more than private clients during the credit crisis.

Institutions account for slightly more than a quarter of RAB's assets at present and Couttie said the firm was putting more effort into attracting assets from such clients.

"It (net inflows across the business) began towards the end of the first half. We're beginning to see now a bit more consistency," he said in an interview with Reuters. "We're putting more effort on focusing on institutions."

RAB, which has cut costs by more than a third, said it expected a 2009 loss after tax of around 3 million pounds ($4.79 million).

The group posted a loss after tax of 17 million pounds in 2008, though that included exceptional charges totalling almost 18 million pounds.

Couttie said the firm was looking at small acquisitions outside its core areas of natural resources and would consider other strategic options.

"There are one or two smaller teams and the like (that we're looking at), although our focus is on building assets," he said.

"We would also consider any sensible strategic advancements to our cause... If someone came along with a very large cheque, it's something we'd have to think about," he said, adding RAB was not specifically looking for such opportunities.

SPECIAL SITUATIONS

RAB also said its high-profile Special Situations fund had removed all its leverage and reduced exposure to unlisted securities to one-third from more than two-thirds a year ago.

The fund's investors agreed to a three-year lock up in 2008 after the fund had trouble selling assets in illiquid markets.

Special Situations, having seen a 70 percent performance loss in 2008, rose 5 percent last year as strong performance from its listed holdings was held back by writedowns on its unlisted portfolio.

"I can't say that's at an end but the bulk of the pain has been taken," said Couttie, referring to the writedowns.

The company said nearly all funds were in positive territory for the year, with particularly strong performance in credit, natural resources, emerging markets and Asian strategies.

"This has created a good context for asset-raising in the coming months and has taken a higher percentage of the Company's assets under management to a position at, or close to, their high water marks," RAB said.

RAB shares, which are up 54 percent over the past year but still well below a peak of more than 120 pence in summer 2007, had risen 4 percent to 19 pence at 1213 GMT.