Philip Richards is to step down as chief executive of RAB Capital as the embattled hedge fund manager reels from a profits warning, a sliding share price and a collection of ill-fated investments including Northern Rock, the nationalised mortgage bank.

He will be replaced by Stephen Couttie, the chief operating officer since 2005 and the finance director since last April. A search for a new executive has begun.

Mr Richards, who founded RAB nine years ago with Michael Alen-Buckley, the chairman, will now concentrate exclusively on running RAB's $1.4 billion Special Situations Fund, the company said today.

Mr Richards, whose background is in fund management, has been running Special Situations since it was launched several years ago.

The fund became renowned for its investment in the Rock. Mr Richards spoke passionately in public in defence of the rights of its shareholders.

In the weeks following the near-collapse of the stricken lender, Mr Richards placed a £50 million bet on its recovery and became the second largest shareholder behind fellow hedge fund SRM Global.

At the end of July, having given warning on profits two months earlier, RAB admitted that the fund was down 23 per cent for the six months to the end of June.

At the same time it reported that first-half profits had almost halved to just £12.5 million before tax. Assets under management had fallen by more than $1 billion since the beginning of the year.

RAB's shares have fallen more than 70 per cent from highs of 125p a year ago to close last night at 37.5p.

Today they were little moved, up 0.25p to 37.75p.

Mr Richards also manages the Global Mining and Resources Fund, launched late last year. For the year to date, the fund is down 13 per cent after suffering from the sudden downturn in the oil price and its impact on related shares.

Katrina Preston, analyst at Landsbanki, said: "The implication that the chief executive role had become so time consuming as to have implications for the performance of Richards' key funds underlines the extent of RAB's current woes."

RAB insisted that Mr Richards was not being demoted. A spokesman said it was increasingly best practice in the fund management world to separate corporate executive responsibilities from asset management duties.

"This has been on the agenda for quite some time," he said. Mr Richards remains on the group's board.

Meanwhile, CQS, the $9.6 billion London hedge fund, today launched the $160 million Global Volatility Fund, which will aim to capitalise on the volatility that has beset the equity markets for at least the past 12 months.

"CQS believes that equity market volatility provides a consistent opportunity set to capture profits for investors," the fund said.

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