Brevan Howard's investors voice concern over its size
Europe's largest hedge fund manager has sought to address concerns among some investors that it is too large to continue making strong returns in markets that are shallower than they were before the financial crisis.
The managers of the BH Macro fund said in a report last week that some investors in Brevan Howard Asset Management's $16bn (€10.8bn) flagship fund were worried about the fund's future performance because it was too big. BH Macro feeds into the flagship global macro master fund, which has $16bn in assets.
The concerns focus around the fact that large funds trading in thin markets run the risk of affecting the markets to their own detriment by dint of their size.
Brevan Howard is Europe's largest hedge fund manager with around $25.7bn in assets, including around $5bn it took in this year. It has about as many assets as the $26.3bn it managed in the middle of last year. In this regard, it stands in contrast to its industry, which was drained of a record $155bn of redemptions last year, from which it is yet to recover, according to data providers Hedge Fund Research.
One London investor told Financial News: "What a nice and unusual problem for them – most investors are worried that their managers are too small, if anything".
But a source close to Brevan Howard said the firm now had a smaller impact on prices by trading markets than it did before the crisis. The source added that the fund seemed to have shown that it could shrug off the possibility of faltering by making strong returns both last year and this year. According to the update from BH Macro, the fund made 20.3% last year and 16% this year.
BH Macro's managers said: "The current opportunity set remains exceptionally rich for all our funds. The master fund in particular is having no trouble generating returns on current assets."
Nevertheless, the flagship fund is investing less than it was previously. Its balance sheet shrunk to $17bn, from $62bn at the start of last year, according to its managers.
Gunther Thumann, chief executive of Brevan Howard Group Holdings, the manager's parent company, said Brevan Howard's other funds have also made money this year. Returns range from 27.4% for the emerging market strategies fund, to 2.7% generated by the equity strategies fund.
– Write to: dwalker@efinancialnews.com
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