RAB To Refocus Special Situations As Investors Pull 79% Of Assets

Apr 6 2011 | 12:20pm ET

Three years after its apparent death-spiral began, RAB Capital is putting an end to its Special Situations Fund as we know it.

The firm said that that investors are seeking the return of four-fifths of its flagship's assets when the three-year lockup it won as it was losing more than 70% in 2008 expires on Oct 1. RAB said it will meet all of those redemption requests, totaling 79% of assets, leaving Special Situations, which managed more than US$2 billion at the beginning of 2008, with less than US$100 million.

"To meet our obligations, we have been managing the Special Situations portfolio for liquidity at the expense of performance," Special Situations manager and RAB co-founder Philip Richards said.

Richards stepped down as CEO of the firm in 2008 to focus on turning the fund's fortunes around. But even with three years to work with, he has been unable to do so: Special Situations followed its disastrous 2008 with a measly 4.6% return in 2009, when the average hedge fund soared more than 20%, and lost 7.6% last year.

Given that record, RAB is recasting Special Situations as a natural resources-focused fund, with Richards still at the helm.

"We made mistakes in the run-up to the crisis and that has been a chastening experience," Richards said. "We have learnt from it and are already using those lessons to the benefit of our investors."

RAB said the Special Situations redemptions would cut its 2011 revenue by about 5%.


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