February 21, 2018 / 10:08 AM / 25 days ago

Exclusive: Investment star Alan Howard's comeback hits headwind

NEW YORK (Reuters) - A fund managed directly by Alan Howard, one of Britain’s best known investors, lost nearly 9.0 percent net of fees from May through December 2017, according to information provided to Reuters by a spokesman for two New York City employee pension funds.

The Brevan Howard AH Fund LP was launched last year amid client defections from Brevan Howard Asset Management LLP, Howard’s London and Jersey-based firm. The appeal of the new fund, which helped attract new money, was that it was managed solely by Howard, a so-called macro trader who made his name through Brevan Howard’s impressive profits during the financial crisis of 2008.

The AH fund’s previously unreported losses, based on when the New York City Fire Department Pension Fund and the New York City Police Pension Fund were invested in it, are larger than the 5.4 percent decline posted over all for last year by Brevan Howard’s flagship Master fund. 

It also underperformed the wider industry, where macro hedge funds reported an average gain of 2.24 percent in 2017, according to data tracker HFR.

Reuters was unable to determine how the AH fund performed so far in 2018.

Brevan Howard’s Master fund gained 2.44 percent in January, and the wider industry has benefited from trading opportunities tied to gyrations in equity markets and the prospect of further Federal Reserve interest rate increases. The benchmark HFRI Macro Index gained 3.7 percent in January, industry data shows, the best monthly gain since February 2008.

Hedge fund returns are typically confidential unless they are published by a public sector client whose reports often lag by a month or more. 

A spokesman for Brevan Howard declined to comment on the AH fund. Tyrone Stevens, a spokesman for the New York pension funds, declined to comment on the AH Fund’s performance beyond the figures provided.

Both the New York City pension funds withdrew money from Brevan Howard’s Master fund to invest in the AH fund in May, according to Stevens. The two had a combined $129 million in Howard’s fund at year end and they remain invested in AH and are no longer invested in the Master fund, he said. 

Howard impressed investors in 2007 and 2008 when he and his team of traders produced gains of at least 20 percent for the Master Fund. At the time, most hedge funds sustained large losses.

Brevan Howard’s AH and Master funds, along with others who practice the strategy, typically trade securities related to interest rates, currencies and stocks based on broad predictions about the global economy.

In three of the last four years, however, Brevan Howard’s U.S. dollar-denominated Master fund has produced losses, according to client materials seen by Reuters, prompting some clients to withdraw their money.

Brevan Howard’s overall assets under management have subsequently dropped to about $9 billion as of January 1 according to its website, down from more than $40 billion in 2013, as reported by Reuters that year.

While Brevan’s assets have declined, the AH fund attracted fresh capital, raising more than $700 million from outside investors last year, Reuters previously reported, on top of around $400 million or $500 million from Howard himself and roughly $2 billion transferred from the Master fund.

A more recent figure for the AH fund’s assets was unavailable.

Reporting by Lawrence Delevingne; editing by Carmel Crimmins

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