Key Takeaways
- • Brevan Howard Asset Management received an additional $2 billion in redemption requests from its flagship fund in 2016, reducing assets from $13.7 billion (mid-September) to approximately $11.7 billion by year-end—nearly half the fund's size from one year prior.
- • The flagship macro fund has delivered weak returns, posting a 2% loss in 2015 and declining 3.4% year-to-date through October 28, 2016, triggering investor withdrawals amid broader hedge fund underperformance.
- • Assets under management have collapsed from $40 billion firmwide in 2013 to current levels, with cofounder Alan Howard acknowledging that the flagship fund's previous $27 billion size was excessive.
- • Key talent exodus has accelerated the firm's decline: founding partner Chris Rokos departed in 2012 to launch Rokos Capital, and Ben Melkman, head of the Argentina fund, left in 2016 to establish Light Sky Macro in New York.
- • The redemptions reflect a structural shift in investor confidence, with the firm reportedly preparing for worst-case asset contraction scenarios as of mid-2016.
Summary
Brevan Howard Asset Management, once a cornerstone institution in the hedge fund industry, is experiencing rapid asset erosion as investors withdraw capital at an accelerating pace. The London-based macro specialist received $2 billion in additional redemption requests during 2016, scheduled for return by year-end, representing a continuation of outflows that totaled at least $5 billion earlier in the year. These withdrawals are particularly significant given that the flagship fund managed only $13.7 billion as of mid-September 2016, meaning the additional redemptions would reduce the fund to approximately $11.7 billion—a decline of roughly 50% in one year.
The redemptions reflect deteriorating investment performance that has eroded investor confidence. The flagship macro fund posted a loss of approximately 2% in 2015 and was down 3.4% through October 28, 2016, underperforming broader hedge fund benchmarks during a period when macro strategies have struggled industry-wide. This sustained underperformance stands in stark contrast to the firm's historical track record and has triggered the expected wave of withdrawals, according to sources familiar with the matter. Management had reportedly begun scenario planning for severe asset contraction earlier in 2016.
The scale of the firm's decline is dramatic. Brevan Howard managed approximately $40 billion firmwide as recently as 2013, and its flagship fund once reached $27 billion in assets—a size that cofounder and billionaire Alan Howard has since acknowledged was too large to manage effectively. The contraction reflects both performance headwinds and a concurrent loss of key investment talent. Founding partner Chris Rokos departed in 2012 to establish the multi-billion dollar Rokos Capital, and Ben Melkman, who led the firm's successful Argentina fund, departed in 2016 to launch Light Sky Macro from New York. These departures have further undermined investor confidence in the firm's ability to generate alpha.
A Brevan Howard spokesperson declined to comment on the redemption figures or broader strategic implications of the capital withdrawals. The firm's situation illustrates the acute pressure facing multi-strategy and macro-focused hedge funds navigating a period of compressed returns, rising redemptions, and elevated talent mobility in the alternative asset management industry.
The redemptions reflect deteriorating investment performance that has eroded investor confidence. The flagship macro fund posted a loss of approximately 2% in 2015 and was down 3.4% through October 28, 2016, underperforming broader hedge fund benchmarks during a period when macro strategies have struggled industry-wide. This sustained underperformance stands in stark contrast to the firm's historical track record and has triggered the expected wave of withdrawals, according to sources familiar with the matter. Management had reportedly begun scenario planning for severe asset contraction earlier in 2016.
The scale of the firm's decline is dramatic. Brevan Howard managed approximately $40 billion firmwide as recently as 2013, and its flagship fund once reached $27 billion in assets—a size that cofounder and billionaire Alan Howard has since acknowledged was too large to manage effectively. The contraction reflects both performance headwinds and a concurrent loss of key investment talent. Founding partner Chris Rokos departed in 2012 to establish the multi-billion dollar Rokos Capital, and Ben Melkman, who led the firm's successful Argentina fund, departed in 2016 to launch Light Sky Macro from New York. These departures have further undermined investor confidence in the firm's ability to generate alpha.
A Brevan Howard spokesperson declined to comment on the redemption figures or broader strategic implications of the capital withdrawals. The firm's situation illustrates the acute pressure facing multi-strategy and macro-focused hedge funds navigating a period of compressed returns, rising redemptions, and elevated talent mobility in the alternative asset management industry.
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