RAB Capital revealed yesterday that Philip Richards would be stepping down as chief executive, as the embattled hedge fund manager reels from a profit warning, a sliding share price and a collection of ill-fated investments, including Northern Rock, the nationalised mortgage bank.

Mr Richards will be succeeded by Stephen Couttie, who has been chief operating officer since 2005, as well as the finance director since last April. A search for a new executive to succeed Mr Couttie has begun.

Mr Richards, who co-founded RAB Capital nine years ago with Michael Alen-Buckley, the chairman, will concentrate exclusively on running RAB's $1.4 billion (£790 million) Special Situations Fund, the company said.

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

The fund became renowned for its investment in Northern Rock, accumulating shares in the weeks following the near-collapse of the lender after it sought emergency loans from the Bank of England.

Before the nationalisation of Rock in February, Mr Richards spoke passionately of the need to keep the bank afloat and the importance of safeguarding the rights of its shareholders.

On behalf of RAB, Mr Richards placed a £50 million bet on the bank's recovery and became the second-largest shareholder behind SRM Global, another hedge fund. RAB has reserved the right to join a group of shareholders taking legal action against the Government to try to ensure that shareholders are compensated for the nationalisation of Northern Rock.

At the end of July, having given warning on profits two months earlier, RAB admitted that Special Situations was down by 23 per cent for the six months to June 30.

At the same time, it reported that first-half profits had almost halved to only £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 37p, down by 0.5p.

Mr Richards also manages the Global Mining and Resources Fund, which was set up 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.

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

RAB insisted that Mr Richards was not being demoted. A spokesman said that it was increasingly common 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 board.

Meanwhile, CQS, the $9.6 billion London hedge fund, launched its $160 million Global Volatility Fund yesterday. The fund 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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