Brevan Howard Master Fund Up 3.8% In 2012, AUM Hits $39B

Geraldine Sundstrom, Portfolio Manager at Brevan Howard

Several UK based hedge funds that have outperformed the best from the US, but it seems the largest UK firms had to struggle through the year. The falling share price and outflowing-AUM story of Man Group PLC (LON:EMG)(PINK:EMGF) is well known. Brevan Howard Global’s performance last year, although less than awful, it was not stellar. BH Global Ltd’s NAV per share rose 4.44 percent in 2012. As of December 2012, the flagship Brevan Howard Master Fund amassed 44 percent of the firm’s NAV. Although a bunch of funds of BH Global did return handsomely, they take very little of the total AUM compared to the Brevan Howard Master Fund that returned 3.8 percent in last year. The returns of the BHMF are close to the fund’s worst performance in history, +1.01 percent in 2010. The master fund manages $27.8 billion, which is almost 60 percent of the total assets under management,$39 billion. The total investor assets including the trading funds exceeds $45 billion.

The management at BH added 38 new professionals and lost a few from its top management.  Chris Rokos, one of the cofounders of Brevan Howard, announced that he was leaving the firm in August last year. ean- Philippe Blochet and James Vernon, are the other two cofounders to have left the firm in previous years. At the beginning of this year, Lord Turnbull, non-executive director and Independent Chairman of Brevan Howard also resigned from the company.

In December, Brevan Howard gained the highest in its Emerging Market strategies (+3.26 percent ), while detracting the most in the Commodities (-1.65 percent). The following is a performance summary of eight of Brevan Howard’s funds.

Strategy: Macro

Brevan Howard Master Fund: 3.8% AUM: $27805 million

Brevan Howard Commodities Stratgies: 5.81% AUM:$790 million

Brevan Howard Investment Fund II Macro FX: -2.32% AUM:$940 million

Brevan Howard Asia Fund: 4.41% AUM:$2072 million

Brevan Howard EM Strategies Fund: 14.13% AUM:$2693 million

Brevan Howard Investment Fund – Emerging Markets Local Fixed Income Fund : 7.21% AUM:$1695 million

Strategy: Credit Long/short

Brevan Howard Credit Catalysis Master Fund: +15.32% AUM: $3175 million

Strategy: Managed Futures

Brevan Howard Multi-Strategy Master Fund Limited: 4.49% AUM:$4546 million

The firm’s commentary on 2013′s economic scenario sees the drag from fiscal cliff resolution as one of the hurdles to growth in US economy. The long term solution and application of new fiscal policy will gear its full effects on the market.  So Alan Howard’s outlook for this year is only modestly better than last year. Japan’s fourth quarter GDP data was not exciting, but the open ended asset purchase plan of BoJ can provide short term relief. Alan Howard’s tone on China is probably the most positive of all, where industrial indicators and GDP data pointed to a recovery towards the end of the 2012. In UK, due to the rising inflation and zero growth, Mervyn King will be inclined to issue another easing plan in the running year. The firm sees some form of optimism in eurozone, which will be offset by the political tension on fiscal union. France and Netherlands could fall prey to austerity measures, while Protugal, Ireland and Greece could pump up the tightening plans already in place.