Hedge fund RAB Capital, one of the largest shareholders in Northern Rock when the bank was nationalised in February, this morning announced that its first half pre-tax profit had almost halved and assets under management had shrunk by more than $1 billion in six months.

RAB's $1.4 billion Special Situations Fund, managed by its chief executive Philip Richards and among the best performers for some years, plunged 23.1 per cent.

The fund had an 8.18 per cent holding in Northern Rock and major positions in African Minerals, a London-based diamond miner, and Falklands Oil and Gas.

The news comes as many of the world's activist hedge funds are suffering this year, with some posting losses of more than 20 per cent of their funds.

RAB Capital's pre-tax profit for the six months to June 30 was £12.5 million, down from £22.7 million in the same period last year. Revenue was £35.4 million, down from £46.5 million in the first half of 2007.

Assets under management at the end of December were $7.2 billion (£3.6 billion) but they fell to $5.9 billion in June, compared with $6.34 billion for the first half of last year.

Michael Alen-Buckley, RAB Capital's chairman, said: "We are not expecting any respite before the end of the year. As indicated at our annual general meeting in May, the first half of 2008 has been a challenging environment and we have not escaped from the falls across global securities markets."

"Our long-biased natural resources strategies, RAB Special Situations and RAB Energy, were negatively impacted by the reduction of liquidity in businesses with a smaller market capitalisation as investors generally favoured more liquid assets," the hedge fund manager said.

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