Despite a Moderate 2012, Brevan Howard Back in the Black

A cautious approach to the markets, while producing only moderate returns, has served Alan Howard’s Brevan Howard very well.


Alan Howard’s Brevan Howard has returned to the black.

His listed BH Macro Fund was up 2.26 percent through September 21, pushing it up 1.90 percent for the year.

This comes on the heels of a 2.30 percent gain in July, erasing a 3.65 percent loss in the first half of the year.

While the fund is greatly lagging the major global indexes, which are up by double-digits so far this year, chances are Howard’s clients are giving him a little slack.

After all, he made them better than 20 percent in 2008 when most investors lost big bucks in the markets. And last year he was up 12 percent when the average hedge fund in the HFR database lost money.

Keep in mind BH Macro is a listed feeder fund that invests its assets in Alan Howard’s Brevan Howard Master Fund. BH Macro’s assets are about $3.2 billion, compared with roughly $26 billion in the Master Fund. BH Macro’s returns closely track the Master Fund.

It is not known what is working for the fund so far in September.

However, it told clients in its monthly letter that in August the fund mostly made money from interest rates trading, mainly from directional positions in euro swap rates and, to a lesser extent, on directional positions in European government bonds.

It lost money in the foreign exchange market, mostly from being short the euro versus the U.S. dollar, which was a profitable play in the first half of the year.

Howard also revealed an underlying bearishness for the global economy entering September.

For example, BH Macro called growth and the labor market in the U.S. “disappointing.” And in anticipation of likely further Federal Reserve easing that subsequently materialized, the fund asserted: “Even after Fed action, the economy is anticipated to face serious downside risks.”

Addressing the U.K., the fund told clients that tight fiscal policy, further domestic deleveraging and a recession in the European Monetary Union (EMU) continue to hinder U.K. recovery prospects, so “weak growth and monetary stimulus look set to continue.”

About China, it stated: “With no aggressive easing in the pipeline despite weakening growth, China’s activity is anticipated to remain subdued for a prolonged period.”

Howard’s cautiousness for the past few years, however, has served him and his clients very well.