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CHEYNE Capital Management, one of the first London hedge funds to become a victim of the US sub-prime crisis in 2007, saw profits continue to fall last year.

Revenues at the Pall Mall-based group tumbled 52 per cent between 2007/8 and 2008/9. The remuneration package shared between four directors – including co-founders Jonathan Lourie and Stuart Fiertz – has steadily declined from £14.2m in 2007 to £4.1m in the most recent accounts.

Cheyne runs a suite of hedge funds with strategies ranging from special situations to long/short corporate credit. Started in 1999 by two ex-Morgan Stanley traders, the firm became one of the fastest-growing hedge funds in the UK, building its assets under management to £7.5bn before the financial crisis struck.

In summer 2007, its affiliated investment vehicle Cheyne Finance collapsed after suffering severe losses. Since then, net outflows have brought funds under management down to around £3.5bn.

Last year’s accounts are distorted because they cover a nine-month period rather than the 12-month period covered in 2007/8. But it is understood that negative returns from funds impacted on performance fees, while investors pulling cash out resulted in lower management fees.

A spokesperson said: “[These figures] correspond exactly to the nine-month period of the credit crunch, so it’s an unfortunate comparison because it was the worst nine months for markets for at least 70 years.”