Unstructured Finance

Directors buy at battered RAB

Directors’ dealings are widely seen as a sign that management are putting their money where their mouth is, so with RAB Capital’s shares just off a year low, shareholders may be encouraged by two small, recent purchases.

Director Adam Grant spent almost £12,200 on an initial holding of 92,400 shares at 13.203 pence each, while Amanda Moore, wife of non-exec Philip Moore, paid close to £5,000 for an initial stake of 38,674 shares at 12.8334 pence each.

Shareholders will be eager for every bit of good news they can get.

The shares, currently at 12.75 pence and around 100 pence at the end of 2007, dropped intraday to 11.5 pence on Thursday following the firm’s trading update on Wednesday, showing a fall in assets to just $1.26 bln. The firm also told Reuters of a hefty loss for its flagship Special Situations fund (the one that invested in Northern Rock) on Falkland Oil and Gas.

Safe approach pays well for RAB

RAB Capital’s results this morning — showing an expected 32 percent fall in assets but signs of net inflows into its single-strategy hedge funds — also reveal how its managers are positioning their portfolios.

rtx5jedDespite a further 5 percent performance loss year-to-date at Special Situations, after last year’s big losses, performance at RAB’s other funds has been strong — the Energy fund is up 55 pct, the Global Mining fund 42 pct, the Gold and European Credit Opportunities funds 20 pct in H1.

Rising commodity prices have helped, as has an easing of the illiquid markets in which Special Situations found itself caught last year.

Great expectations

It was the outcome most commentators were expecting.

rtx9j4vEven Roger Lawson of the UK Shareholders’ Association, which represented 150,000 small investors, admitted it was “not totally unexpected”.

But the defeat for hedge funds RAB Capital and SRM Global and other former shareholders claiming damages for the loss of their holdings in Northern Rock when it was nationalised last year is nevertheless a hard blow to bear.

The former shareholders may appeal, but a valuation of the equity at zero or close to zero is now looking entirely possible.

RAB Capital

It’s been a tough 2008 for RAB.

As the industry faces its biggest-ever crisis, RAB’s own assets have slumped to just over a quarter of what it ran a year ago, while fees have inevitably fallen too.

Meanwhile it has also taken charges after making acquisitions, only to see their assets fall, and for losses on investing in its own funds.

However, there are reasons to be positive.

The firm retains the backing of the Mittal family, a major investor in its funds, while cash on its balance sheet is high.