Bloomberg – RAB Capital Plc is trying to freeze client redemptions for three years to avoid liquidation of its flagship hedge fund, which lost almost half its value this year.
RAB fell as much as 14 percent in London trading after it said investors have until Sept. 29 to vote on the plan, which would cut fees and postpone redemptions until Oct. 3, 2011.
Special Situations, RAB’s largest fund, has lost more than $1 billion this year from investments in Northern Rock Plc, a mortgage lender nationalized by the U.K. government, and small natural-resources companies such as Oxus Gold Plc, a miner down 68 percent this year. RAB Chief Executive Officer Philip Richards stepped down this month to focus on the fund, once one of London’s best performers, returning 1,475 percent in 2003.
“If the investors reject the proposal, the group would then have to liquidate the portfolio,” said Irfan Younus, an analyst at NCB Stockbrokers in London who has a “reduce” rating on the stock. “In a worst-case scenario, unwinding of this could pose a significant threat to the franchise.”
RAB plans to liquidate the investments if it’s unable to get investor support for the new structure, the company said. It didn’t disclose how many investors had to approve the changes.
We “regret the impact that the performance will have on investors,” Richards said in a statement. “We believe that the underlying thesis of investment in early-stage natural resources is one that will repay patient investors over time.”