RAB Capital underscored the woes of the hedge fund market today as it revealed that assets under management had plummeted from $7.2 billion to $1.9 billion and annual fees had more than halved.

Philip Richards, co-founder of the London-listed asset manager, has handed over his chief investment responsibilities to focus on his funds. He has been chief investment officer since RAB listed on the stock market, but stood down from the chief executive's job last September.

Charles Kirwan-Taylor, who joined RAB in March last year and co-founded Greyshrike Capital, a hedge fund firm, in 2006, has taken on Mr Richards's investment duties to allow him to focus on the poorly-performing RAB Special Situations strategy and RAB Global Mining.

Investors in Special Situations, RAB's flagship fund, last year agreed to tie up their money for a further three years in return for lower fees.

RAB, which has shut funds and struck lock-in deals with investors during the most turbulent period in hedge fund history, admitted that it would post pre-tax profits of only about £11 million for the year.

This is in line with forecasts by City analysts, some of whom reckon that RAB will be lucky to make a profit in 2009.

Brokers at KBC Peel Hunt said today that they believe RAB Capital will just break even this year.

The drop in assets, signalled in November, represents a fall of almost 74 per cent. Management and performance fees, the life blood of hedge fund managers, fell 59.2 per cent from £125 million to an estimated £51 million.

RAB Capital is one of London's few listed hedge funds and is regarded as a barometer of confidence in the industry, which has been battered by investor withdrawals in the face of dramatically volatile investment markets.

However, cutting annual bonus payments to some of RAB's investment managers contributed to a £40 million reduction in costs during the year.

The shares, which have dropped from highs of 125p, dipped this morning but later rose about 1.8 per cent to 9.47p. RAB, listed on the junior AIM market, is worth just over £45 million.

Stephen Couttie, RAB's new chief executive, described 2008 as "very challenging".

He said that market movements meant that the manager would have to take an impairment charge for the year, as well as a goodwill hit of up to £4 million against acquisitions that have dropped in value.

"We expect that continuing market dislocations will bring further challenges in the early months of 2009 and it is too early to comment on the outlook for the year as a whole," he said.

Hedge funds lost more than 18 per cent last year, according to figures from Hedge Fund Research, the Chicago-based research firm.

Worldwide, hedge fund assets under management are estimated to have fallen to about $1.5 trillion from a peak of $2 trillion in 2007.

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