Key Takeaways
- • Brevan Howard's flagship macro hedge fund posted its worst first-half performance since inception in 2003, declining 5.2% through June 2017, marking a significant departure from its historical track record during market crises.
- • The fund suffered four consecutive monthly losses, with June alone showing a 1.5% decline, demonstrating sustained underperformance despite macro hedge funds broadly trading flat year-to-date according to Eurekahedge preliminary data.
- • The 5.2% first-half loss represents a structural challenge for Brevan Howard's core strategy at a time when global equity and bond markets have recovered, suggesting the fund's macro positioning has misaligned with prevailing market trends.
Summary
Brevan Howard Asset Management LLP's flagship hedge fund experienced its most severe first-half decline since launching in 2003, posting a 5.2% loss through June 2017, according to an investor letter reviewed by Bloomberg News. The deterioration was punctuated by a fourth consecutive monthly loss in June, when the fund declined 1.5%.
This performance marks a historic reversal for the macro hedge fund, which built its reputation during periods of market stress, particularly during the 2008 subprime crisis when similar strategies proved resilient. The timing compounds pressure on the fund, as macro-focused hedge funds broadly posted flat returns year-to-date through June 2017 according to preliminary Eurekahedge data, suggesting Brevan Howard underperformed even within its peer category.
The backdrop of strong global equity and bond market recovery during the first half of 2017 appears to have exposed structural vulnerabilities in the fund's positioning strategy. While broader markets benefited from synchronized global growth and accommodative central bank policies, the fund's macro positioning—which typically profits from economic trends and cross-asset volatility—struggled to capitalize on these conditions. The sustained losses indicate this was not a temporary tactical misfire but rather a multi-month challenge to the fund's core investment thesis during a period when traditional macro catalysts remained subdued.
For institutional investors monitoring Brevan Howard, the disclosure signals the first quantifiable evidence of extended difficulty at a firm that had historically differentiated itself through crisis alpha generation and disciplined macro risk management.
This performance marks a historic reversal for the macro hedge fund, which built its reputation during periods of market stress, particularly during the 2008 subprime crisis when similar strategies proved resilient. The timing compounds pressure on the fund, as macro-focused hedge funds broadly posted flat returns year-to-date through June 2017 according to preliminary Eurekahedge data, suggesting Brevan Howard underperformed even within its peer category.
The backdrop of strong global equity and bond market recovery during the first half of 2017 appears to have exposed structural vulnerabilities in the fund's positioning strategy. While broader markets benefited from synchronized global growth and accommodative central bank policies, the fund's macro positioning—which typically profits from economic trends and cross-asset volatility—struggled to capitalize on these conditions. The sustained losses indicate this was not a temporary tactical misfire but rather a multi-month challenge to the fund's core investment thesis during a period when traditional macro catalysts remained subdued.
For institutional investors monitoring Brevan Howard, the disclosure signals the first quantifiable evidence of extended difficulty at a firm that had historically differentiated itself through crisis alpha generation and disciplined macro risk management.
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