RAB Capital, the UK-listed hedge fund firm, is cutting its product range as it announced that its assets under management had fallen amid the financial crisis.

RAB, which has already acted to restructure its flagship RAB Special Situations Fund after it incurred heavy losses earlier this year, said it will shut three sub-scale regulated funds and a number of smaller hedge funds, “which were unlikely to achieve critical mass in the current environment”.  Included in these affected funds is RAB’s only fund with prime broker exposure to the now-bankrupt US firm Lehman Brothers.

The firm is also proposing to shut three out of five funds of funds.

“Since the summer there has been an unprecedented deterioration in the state of the global financial system.  The alternative asset management industry is under severe stress, with private and institutional investors deleveraging and the availability of financing significantly reduced,” the firm said in a statement.

“These steps will result in a more focused product range in three areas of proven expertise and distribution capability: natural resources/energy, long/short equity and market neutral funds.  The board will continue to monitor its strategy in the light of emerging industry and market developments to ensure the optimal structuring of its offering,” it said.

So far, RAB said its Special Situations vehicle has secured the support of investors for a three-year lock-in at reduced fees while RAB Energy and RAB Octane funds have exercised powers to meet redemptions in specie and part of their investor bases have opted for long lock-ins.

Asset outflows and negative investment performance have contributed to a reduction in estimated assets under management to $2.8 billion as at 1 November 2008. This figure includes about $650 million on lock-ups longer than one year.

“Whilst there is some evidence of the rate of redemption notifications slowing, the effect of the above closures, combined with redemptions already posted, is expected to result in assets under management at the end of 2008 of around $2.0 billion," it said.