Brevan Howard moves into mass market
Hedge fund firm Brevan Howard, which is in the midst of its third down year, is branching out to target retail investors in a bid for new investment offerings.
The Geneva-based company’s move is the latest sign that the struggling $2.86tn industry, which was founded to cater to the financial elite, is being forced to move mass market.
Brevan is raising money for two new funds that will allow instant daily redemptions and does not charge performance fees. They are discretionary total return multi-asset funds, investing in long-only equities and fixed-income securities. They will use the firm’s senior macro and risk managers to oversee the portfolio.
Institutional investors have become more focused on easy liquidity following the 2008 financial crisis when some hedge funds put up gates, barring some investors from redeeming.
Brevan, run by Alan Howard, is joining a large group of other asset managers in offering this type of retail fund, known as a Ucit because of the EU rules under which it operates.
Ucits have become increasing popular in recent years as retail investors sought to tap into otherwise unobtainable hedge fund strategies, even as regulators have warned that they may carry more risks for unsophisticated investors.
Brevan’s shift towards so-called liquid alts comes as redemption has soared and the company’s assets under management have fallen to about $20bn, from a high of nearly $40bn.
The firm launched the new funds “because it is how the main partners want to invest their personal non-hedge fund liquid wealth”, a person familiar with the firm said. “It was built for them. BH believes it offers value to investors and it is not capacity constrained so why not make it a business as well as a personal investment vehicle?”
Brevan’s main macro fund, managed by Mr Howard, charges a typical 2 per cent management fee and 20 per cent performance fee. It was down close to 1 per cent in the first quarter after losses in March negated gains for the year. That followed down years in 2015 and 2014. The last time the fund performed positively was in 2013, when it returned 2.7 per cent.
Other macro funds have also struggled. Hedge Fund Research’s macro index has risen 1.5 per cent so far this year, but has fallen nearly 3 per cent in the past 12 months.
The new funds — the Brevan Howard Liquid Portfolio Strategies — which each launched in December at a price of €100 are mostly flat. The Dynamic US Investment Fund is trading at about €102.7, while the Dynamic Global Investment Fund is at €99.38.