Top global hedge fund Brevan Howard takes emerging markets hit

Top global hedge fund Brevan Howard takes emerging markets hit

6:12pm EDT

By Matthew GoldsteinJennifer Ablan and Katya Wachtel

NEW YORK (Reuters) – Brevan Howard Asset Management LLP, one of the world’s largest hedge fund firms with $40 billion in assets, is posting lackluster performance in its flagship fund and heavy losses in its emerging market portfolio. Two people familiar with the numbers said on Thursday that the flagship, the roughly $28 billion Brevan Howard Master Fund, is virtually unchanged for the year as of October 4. The portfolio, the firm’s largest and making macro economic bets, was up about 3.8 percent as of the end of June but has been declining since.The Europe-headquartered Brevan Howard, which has offices around the world including New York, has not been immune to the roller coaster sell-off in U.S. Treasuries.

Like other hedge funds that bet heavily on changes in interest rates and bond prices, its portfolio has been hit hard the past several months by fears the U.S. Federal Reserve will begin reducing its monthly buying of Treasuries and mortgage-backed securities.

The Brevan Howard macro portfolio’s flatish performance compares to a 2 percent decline for macro-focused funds, according to Hedge Fund Research. But the portfolio lags the average 5.6 percent gain posted by all hedge fund as of September 30.

The Brevan Howard Master Fund, launched in 2003, has not had a down year since its inception. A survey by research firm Preqin found that Brevan Howard was the 11th most popular hedge fund for U.S. institutional investors.

Brevan Howard has also been rocked by the sell-off in emerging market bonds and stocks, another side effect of this summer’s speculation the Fed will pullback from its easy money policies to stimulate the U.S. economy that have driven investors into high-yielding investments.

The firm’s dedicated emerging markets hedge fund with $2.8 billion under management is down 12 percent for the year as of October 4, according to marketing material reviewed by Reuters.

The fund managed by Geraldine Sundstrom, who joined Brevan Howard in 2007, has been hit harder than most other emerging market hedge funds. The average emerging market hedge fund is up 2.07 percent this year, according to Hedge Fund Research.

Emerging markets have had a rough year, owing to a growth hiccup in China to protests in Brazil and political upheaval in Egypt. In June alone, U.S.-based EM stock funds saw $17 billion in outflows and U.S.-based EM bond funds suffered $4.24 billion of outflows.

It’s not clear why Sundstrom’s fund has faired worse than other emerging market funds. The Brevan Howard fund is up 1.21 percent this month, a sign it could be starting to turn things around. Indeed, the performance of Sundstrom’s fund has seesawed in recent years. Last year the fund was up about 14 percent, but in 2011, it dipped 6 percent.

A person familiar with the fund said that in the past, Alan Howard, one of the firm’s co-founders, has been a big believer in Sundstrom. The person said after the fund’s 2011 losses, Howard allocated more money to Sundstrom’s portfolio as a sign of support.

Howard is a member of the New York Fed’s Investor Advisory Committee on Financial Markets, a group of prominent money managers who periodically meet with Fed officials to discuss economic policy.

In the United States, Brevan Howard began bolstering its U.S. offices in New York, after curtailing its operations in the U.S. in 2008. The firm, according to a regulatory filing, has about 28 people in New York.

But one of its recent hires, Shelley Goldberg, a commodities strategist, already has left. Goldberg, who joined last year from Nouriel Roubini’s Roubini Global Economics, left to work in so-called green energy, water and infrastructure investing.

In Europe, where most of Brevan Howard’s employees are based, a number of people have left. In August, Bloomberg reported that since May at least a dozen traders have left.

Reuters reported in June that one of those traders was Luke Ding, the manager of the firm’s $570 million currency fund that had struggled to gain traction since its launch.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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