Billionaire Alan Howard may be having the worst year of his career as a hedge-fund manager, but the 54-year-old isn’t ready to throw in the towel.
His firm, Brevan Howard Asset Management, is bracing for at least $1 billion of client withdrawals at the end of the month, as its main fund heads for a record annual loss, according to a person with knowledge of the matter. That caused some investors to wonder if Howard will follow others in the industry by returning capital to clients, said two other people, who asked not to be identified discussing the company’s affairs.
That’s not going to happen, said Anthony Payne, a spokesman for the macro hedge fund, adding there are no plans to convert the firm into a family office. He declined to make any further comments. The company had $10 billion under management at the end of October.
Brevan Howard, once one of the world’s largest hedge funds, has seen its assets plunge by three quarters from its $40 billion peak as investors deserted Howard as he struggled to navigate markets. In a bid to turn things around, the no-nonsense, fast-talking trader has started his own fund to make riskier bets and allowed his top managers to run their own pools again in a strategy u-turn. Howard is also experimenting with artificial intelligence and is planning a fund-services business.
“Before the financial crisis, when you invested in Brevan Howard, you were buying Alan,” said Cedric Fontanille, head of external strategies at Unigestion Holding SA. “But given how poorly he and other macro managers have done in recent years, funds like his need to diversify their businesses, regardless of whether the markets come back or not,” said Fontanille, whose company invests in hedge funds.
It’s been a bruising year for the money manager. Investors pulled an estimated $5.4 billion from Brevan Howard’s main fund this year through October, according to Bloomberg News calculations based on the firm’s investor letters. That fund has lost 5.4 percent in the first 11 months of the year -- compared with average gains of 3 percent by its peers -- and is on course for its worst ever annual performance. Howard founded the firm with colleagues from Credit Suisse Group AG in 2002.
"I can understand managing equity hedge funds is a nightmare, because anything you hedge has just been a mistake in a bull market," said Richard Watkins, chief executive officer of Alternative Asset Solutions. “Losing money on macro trades is much less forgivable." Watkins’s company has helped clients invest more than $10 billion in hedge funds and other money pools.
A cohort of money managers have struggled this year. Billionaire investor Stan Druckenmiller, who boasts the best record in macro trading, this week said he’s had his worst year relative to market opportunities. Caxton Associates’ Andrew Law has lost a record 12.8 percent so far this year, while losses in markets have in the past two weeks forced John Burbank to close his macro fund and Neil Chriss to liquidate his firm.