Last week, when we laid out the biggest hedge fund winners from the Italian bond rout, one name stood out: that of iconic macro hedge fund, Brevan Howard, which otherwise has otherwise had a relatively lackluster and subdued performance over the past few years.
As we reported then, “among big-name managers profiting from the selloff in Italian bonds is Alan Howard, the secretive billionaire co-founder of hedge fund firm Brevan Howard. A little-known hedge fund run personally by Mr. Howard has been betting that Italy’s borrowing costs will rise relative to Germany’s.“
Perhaps the only question was how much of a payday for Howard’s “little known hedge fund” was last week’s turmoil in Italian bonds.
Overnight, Bloomberg gave the answer, reporting that the Brevan Howard AH Master Fund posted a blockbuster 36.7% profit in May. The May gain means that the AH Master Fund, which started in 2017, has now returned about 44% this year, the person said.
“I am happy that the loyalty and confidence shown by my investors has been rewarded with a very positive result,” Howard said via email, without confirming the returns. It wasn’t immediately clear which of the fund’s bets generated such a major return in the month.
Investors will be just as happy, and news of the blockbuster monthly gain will likely result in an influx of new investors. The hedge fund currently manages about $2.3 billion and is open to small amounts of new money from existing Brevan Howard investors, at a management fee of 0.75 percent and a performance fee of 30 percent, another person said. A spokesman for the firm declined to comment on performance and assets.
Howard, 54, started the smaller fund to make riskier bets for himself, outside investors and Brevan Howard’s main fund, which has seen mediocre returns in recent years, so much so that firm-wide assets have fallen about 75% from their peak in 2013 to around $8 billion now. The money manager has been forced to cut fees and go back to his previous business model of running several funds in a bid to reduce reliance on one main money pool.
Separately, the larger, $4.2BN Brevan Howard Master Fund gained 7.6% – its best monthly return since 2008, boosting its YTD returns to nearly 9%.
Howard’s sterling performance during the latest Italian bond crisis marks a significant turnaround for macro trading which has struggled to make money for years, dragged by environment in which logic was turned upside down due to central bank intervention. Poor performance had prompted impatient investors pull money from some of the oldest and most established macro traders including Brevan Howard, Tudor and Caxton Associates, Bloomberg noted. However, that’s reversing now as central banks start to gradually normalize a decade of unprecedented monetary policy, and as logic returns to markets investors have poured nearly $12 billion into macro funds during the first four months of the year, the most of any strategy, according eVestment data.
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