CORRECTED - Hedge firm RAB to auction stakes in prime fund- FT

(Corrects to "dutch auction" in paragraph 3)

LONDON Feb 24 (Reuters) - Hedge fund firm RAB Capital RAB.L is to organise an auction to allow aggrieved investors to sell-off stakes in its Special Situations fund, the Financial Times reported in its Thursday edition.

Investors in the fund had agreed to a three-year lock up in 2008 after the fund had trouble selling assets in illiquid markets.

But the firm has enlisted Credit Suisse (CSGN.VX) to organise a dutch auction on March 8, where both current and outsider investors will be eligible to bid for the stakes of existing clients who wish to exit, the FT said.

Around half of the firm's assets come from institutional investors, who have witnessed the company's assets fall from more than $7 billion in December 2007 due to outflows and performance losses.

Special Situations, having seen a 70 percent performance loss in 2008, rose 5 percent last year as strong performance from its listed holdings was held back by writedowns on its unlisted portfolio. (Reporting by Caroline Copley)