RAB Capital, the quoted hedge fund manager in the thick of the plans for a Northern Rock rescue, today gave warning that turbulent market conditions would wipe out its expected profits gain for the full year.

In a surprise trading update, RAB, which manages more than $7 billion of assets, said that trading conditions in November had been "difficult".

The hedge fund said: "Given the influence of performance fees on profitability at RAB, and the proximity to year-end, this is likely to have an impact on the overall profitability of the group for 2007."

RAB's warning is likely to send analysts rushing to downgrade their forecasts. Last year, RAB made £48.58 million in pre-tax profits. The City had pencilled in an estimated £58.78 million for this year.

RAB shares fell 2p to 79p.

Michael Alan-Buckley, the executive chairman, said that RAB's energy and special situations funds had both suffered in recent weeks.

He said that, because the trading setback had hit the hedge fund so late, it would be virtually impossible to recover ground fully before the end of the financial year.

He said that the timing of the tough markets had been "unfortunate". He said that several of its funds were delivering returns of 20 per cent to 30 per cent and that "the majority of our funds have done reasonably well".

RAB's special situations fund, run by the firm's chief executive Philip Richards, has taken a large stake in Northern Rock and given its backing to a rescue plan tabled by Olivant, run by former Abbey National boss, Luquman Arnold. With a stake of about 6.7 per cent in the Rock, it is the bank's second-largest investor.

Mr Alan-Buckley said that the hedge fund's Rock investment was "little connected" to today's profits alert.

"Northern Rock has not been profitable for us yet," Mr Alan-Buckley said, pointing out that the holding represented less than 1 per cent of RAB's assts and between two and three per cent of the special situations fund.

The RAB chairman signalled that, despite the dire markets, it would be maintaining its support for Olivant's planned Rock rescue.

"We are supporting a case that will give a better return for shareholders and the people working at the company. We think clearly that there is a case for supporting Northern Rock," he said.

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