Oh dear. Just last week Cazenove was arguing that “too much prominence” had been given to RAB Capital’s stake in Northern Rock – which was good for a 3.4 per cent rally in the shares of the hedge fund.
RAB looked set to hand that straight back on Monday with the shares down 2.5 per cent, to 79.05p, as the group warned that trading conditions in November had been “difficult,” and this was likely to hit profits for 2007.
The group now expects pre-tax profit to come in roughly flat on that of 2006, £50.3m, at the lower end of expectations – but it cautioned that “the eventual outcome for the year will be dependent on trading conditions for December 2007 and the actual level of performance fees earned as at 31 December 2007.” The group will be helped out by management fees on its increased level of assets under management.
The group had been expected to post a 28 per cent rise in profit, according to Reuters, to about £65m.
RAB owns just over 6.6 per cent of Northern Rock through its Special Situations Fund – after buying into the beleaguered bank in mid-September, when it was still trading above the £2 mark. The Special Situations strategy is the fund’s largest and is managed by RAB’s chief executive Philip Richards.
With fellow shareholder SRM, RAB has been making a speciality of arguing that the bank should not be allowed (by HMG) to go to the wall. The pair are backing the Olivant proposals, fronted by Luqman Arnold, to restructure the bank.
But it was more bad news for RAB on Monday. Northern Rock led the fallers in the FTSE, down 6.8 per cent to 103.4p.