Top global hedge fund Brevan Howard takes emerging markets hit

Thu Oct 10, 2013 7:30pm EDT
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By Matthew Goldstein, Jennifer Ablan and Katya Wachtel

NEW YORK (Reuters) - Brevan Howard Asset Management LLP, one of the world's largest hedge fund firms with $40 billion in assets, is posting lackluster performance in its flagship fund and heavy losses in its emerging market portfolio.

Two people familiar with the numbers said on Thursday that the flagship, the roughly $28 billion Brevan Howard Master Fund, is virtually unchanged for the year as of October 4. The portfolio, the firm's largest and making macro economic bets, was up about 3.8 percent as of the end of June but has been declining since.

The Europe-headquartered Brevan Howard, which has offices around the world including New York, has not been immune to the roller coaster sell-off in U.S. Treasuries.

Like other hedge funds that bet heavily on changes in interest rates and bond prices, its portfolio has been hit hard the past several months by fears the U.S. Federal Reserve will begin reducing its monthly buying of Treasuries and mortgage-backed securities.

The Brevan Howard macro portfolio's flatish performance compares to a 2 percent decline for macro-focused funds, according to Hedge Fund Research. But the portfolio lags the average 5.6 percent gain posted by all hedge fund as of September 30.

The Brevan Howard Master Fund, launched in 2003, has not had a down year since its inception. A survey by research firm Preqin found that Brevan Howard was the 11th most popular hedge fund for U.S. institutional investors.

Brevan Howard has also been rocked by the sell-off in emerging market bonds and stocks, another side effect of this summer's speculation the Fed will pullback from its easy money policies to stimulate the U.S. economy that have driven investors into high-yielding investments.

The firm's dedicated emerging markets hedge fund with $2.8 billion under management is down 12 percent for the year as of October 4, according to marketing material reviewed by Reuters.   Continued...