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Alan Howard English private hedge fund investor Alan Howard, who heads up Brevan Howard Asset Management, which is based in Geneva and in London, has acknowledged his “macro fund” had a bad year in 2013.
In his annual letter to his investors, Alan Howard frankly acknowledged what was, for him at least and likely for his investors too, a “somewhat disappointing” performance.
While his fund invests in a number of different asset classes its primary focus lies in interest rate and currency markets, where it has done exceptionally well in the past. Such macro funds bet on the expected impact of overall international economic and monetary trends on interest rate and currency markets.
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In 2013 Brvan Howard didn’t lose money at least, but his flagship fund BH Macro produced a return for the full year of just 2.59%. By comparison, an indexed investment in the S&P 500 would have yielded over 30% for the year.
In his letter to investors he explained that his fund’s interest rate strategies last year were based on the European Central Bank interceding in European markets with stimulative policies much earlier than they eventually did. Accordingly an aggressive long bet on European interest rates did not work out in January, as the ECB initially actually tightened its policies. The ECB only subsequently gave way to the trend he was expecting when the European economy displayed such continued weakness they had no choice.
In money market trading timing is of course everything, even more than stocks and shares. However, importantly Howard sees success for sticking to his guns with the same strategies now moving into 2014. As he put it in his letter to investors,
“… as the fundamental fiscal imbalances have not yet been resolved, it is likely that the fiscal stance will become more restrictive in 2014, which may lead prospects for growth to deteriorate in the latter part of the year. Should the current disinflationary pressures in Europe persist, the ECB will have to take more aggressive monetary action.”
Putting that in plain English, in other words, austerity sucks, France and the Mediterranean countries have merit to their case for easing up, and sooner or later the Central Bank will have to face up to it and do something if European fiscal policy does not change any time soon.
Howard also said that stronger-than-expected U.S. employment numbers, and just retired Federal Reserve Chairman Ben Bernanke’s message about tapering the central bank’s stimulus program, which indeed later began on a modest scale “triggered substantial turmoil in the financial markets”.
After recovering from its initial setback in January 2013, with gains achieved from February to early May, the US policy expectation then hurt Brevan Howard, from “late May to the end of October.”
Howard also confirmed that he would stick with two of last year’s winning themes again in 2014: long Japan, and long the US dollar.
As he put it in his letter, “Japanese authorities remain determined to reflate the Japanese economy and even if they eventually fail, will take extraordinary steps in an attempt to achieve this goal. What is possibly different this time is that Prime Minister Abe has a clear mandate to pursue his policies.”
You absolutely need strong nerves, and the ability to take the long view, as well as be nimble responding to short-term movements, if you are going to play in these markets. Alan Howard’s track record seems to indicate that he for one certainly is up for it.
About Alan Howard
Alan Howard, who is aged 50, is the co-founder of the money management firm Brevan Howard Asset Management. In February 2013 Forbes placed him as number 21 on their top 40 hedge fund managers list, with estimated 2012 earnings of US$200 million, and with an estimated personal net worth of US$1.2 billion.
Having founded Brevan Howard originally in 2002 with colleagues from Credit Suisse, where he worked at the time, today the firm has US$41 billion of assets under management. Brevan Howard is a global alternative asset manager, managing significant institutional assets across a number of diversified strategies. His partnership also sold a 15% interest in the firm to reinsurance company Swiss Re in 2007, according to Forbes.
Alan Howard graduated from Imperial College London with a masters degree in science and went to work for Salomon Brothers in their bond department before moving to Credit Suisse. Today Howard also serves on the New York Federal Reserve’s Investor Advisory Committee on Financial Markets.
Howard founded the Alan Howard Charitable Foundation, which contributes to charities that support Israel and other Jewish causes with a focus on Holocaust education, the homeless and Israeli film. He also supports a number of charities for helping the homeless.
Last year in November, 2013 he announced a donation of US$32 million (£20 million) to his alma mater, Imperial College, London to establish there a new Centre for Financial Analysis. It will be headed up by two heavyweight economists, Professors Franklin Allen and Douglas Gale, who are leaving top notch US universities to come and set up the Centre.
In 2010 Howard moved his personal residence to Geneva, Switzerland, for life style reasons, as well as presumably for its favourable personal and corporate tax advantages for alternative asset companies such as his. Several of his traders followed him there as well. The tax advantages of Geneva must indeed outweigh Geneva’s status as one of the most boring places on earth to reside.
He is married to Sabine and they have four children.
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