Brevan Howard Asset Management, one of the world’s largest hedge funds, with more than $40 billion in assets under management, is closing down its emerging markets fund, according to a person briefed on the fund’s activities.
The $2 billion fund, founded in 2007, lost 15 percent last year as emerging markets like Brazil and Turkey were rattled by tightening United States monetary policy. The HFRI emerging market index returned 5.6 percent last year and emerging market hedge funds attracted $6.4 billion in new money, according to Hedge Fund Research.
As a result of the closure, Geraldine Sundstrom, the fund’s manager and a prominent investor in London, will leave Brevan Howard, said the person briefed on the fund.
The hedge fund declined to comment.
As Europe’s largest hedge fund, Brevan Howard is closely watched. Its flagship Master Fund started trading in 2003, and it has never incurred a loss.
But its 2013 returns were lackluster. Alan Howard, co-founder the firm, apologized to investors in his year-end letter, calling Brevan Howard’s 2.6 percent return “somewhat disappointing.†HFR indexes for global macro were down 0.22 percent and 0.75 percent for the same period. Though it is not an equity fund, its returns paled in comparison to almost 30 percent return of the Standard & Poor’s 500-stock index.
Interest rate trading, one of the firm’s main focuses, proved a tough slog with the federal government’s decision to pare its purchases of fixed-income assets, helping bring the year’s returns down significantly, the year-end letter said. The Master Fund had been up 13 percent through the end of May, according to The Wall Street Journal.
The firm’s reputation as a solid risk manager has made it a darling among pension funds and institutional investors. It has had blowout years, such as in 2008 when it returned 20.32 percent against the S.&P. 500’s 38.5 percent plunge. The $4.4 billion BH Credit Catalysts gained 13.9 percent last year and BH Asia, a $2.4 billion fund, posted an 11.6 percent return.
The firm has suffered from significant turnover in the past year, with traders departing from divisions including structured products and currencies. It has also had some prominent hires, including Gerhard Seebacher, who joined Brevan Howard in New York last month as co-head of global debt trading, after 18 years at Bank of America Merrill Lynch, and Vincent Craignou, the former global head of foreign exchange and metal derivatives at HSBC, who joined the company as senior trader. Two of the firm’s former partners, Klaus Oestergaard and James Vernon, have rejoined.
The firm disclosed in a filing that it paid the partners in its British unit as much as 60.4 million pounds, or $99 million, for the year through March, Bloomberg reported. The highest paid partner received £39.4 million, down from £78.9 million a year earlier. The British unit, which is based on the island of Jersey, earned £127 million in fees for its work managing the funds.
