RAB Capital, the Mayfair hedge fund famed for its multimillion-pound lost bet on a recovery in Northern Rock, today admitted the scale of its own problems, with a dive in profits and funds under management.

RABreported a 45% slump in profits to £12.5 million in the six months to the end of June as the value of assets it manages dived from $7.2 billion (£3.63 billion) at the start of the year to $5.4 billion.

It is one of the few London hedge funds to open itself to scrutiny by listing on the stock market. Its high profile and the belief that hedge funds can make money in any market attracted investors such as major shareholder Lakshmi Mittal, Britain's richest man. However, the investment manager who chairs the company, Michael Alen-Buckley, admitted today that, like almost every other stockpicker in London, it is failing to perform.

"The first half of 2008 has been a challenging environment and we have not escaped from the falls across the global securities markets," he said. "We are not expecting any respite before the end of the year."

RAB shares, which have crashed more than two-thirds in the past year, today fell 1¼p to 37¼p. The firm said it had managed to crank up the fees it charges its customers for running their funds by 11% to £26.8 million.

But it admitted the performance fees it pays itself for successfully running those funds crashed by more than 60%, from £22.4 million to just £8.3 million.

That is bad news for RAB's hedge fund managers, who are used to multimillion-pound bonuses, and especially for chief executive Philip Richards, a famed City stockpicker who has taken tens of millions of pounds from the business in recent years.

RAB said its bonus provision for the half year has been calculated at £10.2 million against last year's £18.6 million.