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Brevan Howard: “worst case scenario” or sign of the times?

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Stockholm (HedgeNordic) –  Brevan Howard – ranked by the Hedge Fund Intelligence Global Billion Dollar Club (HFIGBDC) as the 19th-largest hedge fund in the world in 2016 – is making contingency preparations in anticipation of mounting numbers of investors preparing to withdraw funds, undisclosed sources suggest

The purported move would come, not only amid considerable and mounting investor anxiety related to impending macro events in June (Brexit; doubts surrounding the FED’s next hike), but due to Brevan Howard’s poor performance over at least the past two years, and including the fact that several of its star traders have recently left to incept competing firms. For example, Ben Melkman, a former Brevan partner, recently left to start his own fund, taking investors with him, while Chris Rokos also started his own firm in 2015 (raking in at least USD3.5b so far).

According to Rachael Levy of Nordic.businessinsider.com, another undisclosed source familiar with Brevan Howard suggested the fund posted a loss of 2% for 2015 and remained down 1.8% for Q1 2015, while the fund itself, according to the Financial Times, has not reported a year of gains since 2013. Still yet another source suggests Brevan now manages roughly USD 20 billion, which would be down USD 3.7 billion from assets reported by the HFIGBDC at the outset of 2016. Brevan managed as much as USD 40 billion as late as 2013.

In line with these suggestions, investors are said to be distressed with Brevan’s performance and high fees, and are pulling their money, leading to the drop in assets. In addition to staff cuts and the closing of several of its funds in 2015, Brevan is thereby said to be preparing a contingency plan for a “worst case scenario,” in the event significant numbers of investors begin to ask for redemptions.

Brevan’s suggested troubles, however, reflect woes in the industry as a whole: macro funds overall lost 3.2% in 2015, according to eVestment, and while up 0.6% through May, face arduous upcoming challenges with shifting grounds on e.g. Brexit, and broader global uncertainties.

Brevan Howard representatives at Peregrine Communications, however, suggest there is no such “contingency plan,” and that under any circumstances, there would be nothing unusual about contingency planning by funds having to unwind investments in case of redemptions. Funds of Brevan’s size typically plan structurally how to unwind assets if and when the need arises, particularly where investors opt to sell the same assets first, depressing the price further.

Nonetheless, Brevan Howard has opened up retail “alternative” mutual funds across Europe to help shore up its investor base – if need be.


Picture: (c) larry1235—shutterstock.com

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Glenn Leaper, PhD
Glenn Leaper, PhD
Glenn W. Leaper, Associate Editor and Political Risk Analyst with Nordic Business Media AB, completed his Ph.D. in Politics and Critical Theory from Royal Holloway, University of London in 2015. He is involved with a number of initiatives, including political research, communications consulting (speechwriting), journalism and writing his post-doctoral book. Glenn has an international background spanning the UK, France, Austria, Spain, Belgium and his native Denmark. He holds an MA in English and a BA in International Relations.

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