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Brevan Howard Said to Restrict Investor Inflows to Three Funds

Date: Monday, December 7, 2009
Author: Tom Cahill, Bloomberg

Brevan Howard Asset Management LLP, Europe’s largest hedge-fund firm, limited the flow of money into three funds as client assets approached last year’s high, according to people familiar with matter.

The firm closed its $2 billion Asia Fund and $2.5 billion Emerging Market Strategies Fund to new investors as of Nov. 1, according to three people, who asked not to be identified because the information is private. In October, the London-based firm raised the minimum investment in Brevan Howard Master Fund Ltd., its largest, to $20 million from $1 million.

Brevan Howard may consider shutting the $21.3 billion master fund, whose assets are almost back to last year’s peak, said the people. The firm said in November that some clients had raised concerns that the fund was getting too big to effectively run. Brevan Howard managed $25.7 billion as of Sept. 30, compared with $27 billion last December.

“It’s a good sign that people who were sitting on their hands and waiting for things to happen are acting, writing checks and investing again,” said Jerome Lussan, founder of hedge-fund consultants Laven Partners LLP in London. “As they go back to hedge funds, people are going back to the most recognizable and comfortable names because they can’t afford to make mistakes again.”

Tudor, Odey

Paul Tudor Jones’s Tudor BVI and Lansdowne Partners LP’s $9.3 billion Lansdowne UK funds restricted inflows this year after replacing money pulled by investors in 2008. London-based hedge-fund managers near or above firm records for client assets include Crispin Odey’s Odey Asset Management LLP and Michael Platt’s BlueCrest Capital Management LLP.

James Vernon, a Brevan Howard founding partner who handles investor relations, didn’t return calls seeking comment.

“If and when we sense that a fund cannot deliver an attractive return because of the size of its assets relative to market opportunities, we intend to recommend to that fund’s board to return capital to investors,” the firm said in a Nov. 4 statement. “For the time being however, we remain sanguine about the size of our assets under management and confident that we can continue to generate attractive returns.”

Brevan Howard didn’t restrict investor withdrawals in 2008 when more than 59 percent of investors faced limits on pulling money from hedge funds, according to an April survey by investment advisory firm Casey, Quirk & Associates LLC of Darien, Connecticut. About $5 billion was removed from the master fund in 2008.

Master Fund Returns

The master fund, which trades fixed-income securities and currencies based on macroeconomic developments, returned 20 percent in 2008, when hedge funds on average lost 19 percent and the Standard & Poor’s 500 Index dropped 37 percent. It rose 18 percent this year through November, compared with the 13 percent gain by the HFR Global Hedge Fund Index.

Brevan Howard started BH Macro Ltd., a closed-end fund listed on the London Stock Exchange, in March 2007. BH Macro invests in the master fund, an alternative for investors seeking to mirror the original fund’s performance.

The firm was founded in 2002 by Alan Howard and four other traders from Credit Suisse First Boston’s proprietary fixed- income trading desk. The master fund is managed by Howard and a team of traders.

The Asia fund, which rose 5.5 percent through Sept. 30, is run from Hong Kong by Kaspar Ernst. The emerging-markets fund is managed by Geraldine Sundstrom in London and rose 27 percent through Sept. 30, according to a Nov. 4 statement from the company. Both remain open to existing investors.

To contact the reporter on this story: Tom Cahill in London at tcahill@bloomberg.net