Investor's Champion Blog
Provides refreshingly forthright, independent comment on predominantly small cap companies and specialist investment funds. Informed opinion, based on first-hand research, but pulls no punches in exposing management weaknesses.

AIM quoted single manager hedge fund groups

I have of late contemplated 2 of the AIM quoted hedge fund groups, Absolute Capital Management (ACMH) and RAB Capital (RAB).

Absolute Capital Management is a specialist hedge fund management group that was created in 2004. It made the news last week with the acquisition of Argo Capital Management for £50.46 million resulting in the combined group’s assets under management increasing from $1.5 billion to $2.4 billion.

RAB Capital, the London based hedge fund manager was founded in 1999 and came to AIM in March 2004 with a market price of 25p. It has since seen its shares rise to over 110p. The shares currently stand at c93p resulting in a market cap of c£480m.

I have to admit a soft spot for RAB having been an early investor in one of its funds (unfortunately not the Special Sits, I hasten to add!) and a shareholder.

The Independent newspaper reported previously that having a quote makes a lot of sense for this type of business and analysts are expecting further floats. It went on to comment that it gives firms such as ACMH a currency with which to make acquisitions and also to pay staff in a tax-efficient way. A Stock Exchange listing also means that retiring partners at the firm can easily cash in on their shareholdings. I can tell you that if a key hedge fund manager retires a lot of the investors would contemplate retiring their money at the same time!

Generally speaking I don’t understand the logic behind single manager hedge fund roll ups.

For me the business model doesn't make sense at all as really good single hedge fund managers who have a core base of big institutional investor clients rarely sell up-quite frankly with all the money they can make it isn’t really isn't worth it!

The value of a hedge fund business based on the usual metric of assets under management (AUM) doesn't really match up with hedge fund manager's performance based remuneration structure and a performance based remuneration structure doesn’t really work in a public company where everyone is looking over your shoulder and there are lots of inquisitive shareholders to please. It was also an issue at Gartmore where in a good year their (lone)star hedge fund manager Roger Guy reputedly took home more than the entire board of the plc!

I used to know a really fantastic hedge fund manager who managed c$200m (small beer in the fund management business). Based on a AUM multiple of c10%, which is fairly rich, he could conceivably have sold his business for something in the region of c$20m-at the high point! Now I know he took home a performance fee one year alone of c$20m (and it wasn’t his best year). Furthermore, there were only about 5 people in his entire business.

ACMH has its base in the less well regulated domicile of the Cayman Islands. Now that doesn’t necessarily say much in the hedge fund world, but a UK regulated (and based) operation certainly gives me a little more confidence and should command a premium. Look at all the nice news flow you get with RAB as a UK entity!

My reservations notwithstanding they both look interesting stories that are probably worth following.

If you would like to receive a copy of my entire note on the merits of RAB and ACMH please email me at


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