Alan Howard’s BH Macro Fund Slips into Red

Alan Howard’s BH Macro fund has slipped into the red.

The London-based manager lost 1.78 percent in May, putting him down 1.47 percent for the year after posting his third-consecutive losing month.

This is big news. Howard is noted for having made money in 2011 as well as 2008 when most other hedge fund managers were in the red. In fact, BH Macro has not lost money since its 2007 inception.

Last year Howard personally earned $350 million after steering his $26 billion BH Macro fund to a 12.04 percent net return, mostly by zigging when the overall markets zagged. For example, when the stock market tanked over the summer, he posted close to a 10 percent gain in the third quarter. However, when the markets came roaring back in October, Brevan Howard actually lost a bit of money that month. In general, the fund made most of its money from correctly betting on the direction of interest rates throughout the year.

Hedge funds on average lost between 1 percent and 3 percent in May, depending upon the database you consult.

However, macro funds gained 1.7 percent in May, their best monthly performance since April 2011, according to HFR. Their year-to-date gains are now 1.9 percent, with significant contributions coming from systematic strategies and positions in fixed income, commodities and currencies, HFR notes.

At the beginning of the year, Brevan Howard altogether had $34.9 billion in assets after returning about $2 billion to investors from his main fund.

At the end of the first quarter, BH Macro — which invests all of its assets in the ordinary shares of Brevan Howard Master Fund Limited — had lifted its exposure to fixed income to 35 percent of its value at risk (VaR) from 29 percent at year-end and more than doubled its exposure to credit, to 22 percent, according to its most recent management report.

At the end of April, about 35 percent of its assets were exposed to the Americas and 42 percent to Europe, according to a firm report.

Meanwhile, Ken Griffin’s Citadel also posted a loss in May, dropping 1.5 percent. However, he is still up 7.5 percent for the year.

Sources say the multistrategy fund lost money in its macro book but made money in equities. In fact, its Citadel Equity Fund was up 0.85 percent in the month and has gained 6 percent for the full year.