Bloomberg News

Brevan Howard Traders Said to Depart as Fund Posts Loss in June

August 19, 2013

Brevan Howard Traders Said to Depart as Fund Posts Loss in June

A security guard stands outside 55 Baker Street, the building housing the offices of Brevan Howard Asset Management LP, in London. Photographer: Chris Ratcliffe/Bloomberg

Two Brevan Howard Asset Management LLP credit traders left in recent weeks, as the firm scales back after its biggest hedge fund had the worst monthly loss since 2008 in June, two people with knowledge of the matter said.

Wayne Leslie, 38, departed less than a year after joining the London-based hedge fund from Goldman Sachs Group Inc. (GS:US), where he was a managing director responsible for European investment-grade credit trading, said the people, who asked not to be identified because the departures haven’t been made public. Jason Feasey, 40, who focused on structured credit, had joined the hedge fund from Bank of America Corp. (BAC:US) in 2011.

At least a dozen traders have left Brevan Howard, Europe’s second-largest hedge fund firm, since the end of May as the firm struggles to profit in markets roiled by the U.S. Federal Reserve’s indication that it may reduce its purchases of fixed-income assets. The Master Fund, which accounts for more than two-thirds of Brevan’s $40 billion of assets, fell 2.9 percent in June, its worst month since September 2008. The pool declined another 0.9 percent in July, cutting gains for the year to 3 percent, a performance report obtained by Bloomberg News shows.

“The very successful macro funds run like a prop-trading unit at a bank in that they farm out money to various people,” said Jacob Schmidt, founder of London-based Schmidt Research Partners Ltd., which carries out due diligence on hedge funds for investors. “It’s a very disciplined exercise where they give you money if you make money. If you don’t make money, it’s ‘See you later.’”

Trader Exodus

Feasey didn’t respond to messages left on his mobile telephone. Leslie didn’t reply to e-mails seeking comment. Officials at Brevan Howard declined to comment.

Caps on bank bonuses and new rules limiting risk-taking after the 2008 collapse of Lehman Brothers Holdings Inc. helped to trigger an exodus of traders from lenders to hedge funds such as Brevan Howard. The number of traders at the firm jumped by about 70 percent since 2009 to more than 80 at the start of this year, according to a person with knowledge of the matter. The firm has since reduced that number to about 70 on concern it had grown too big too rapidly, the person said.

The departures include people who had only been at the firm a few months. Milena Todorova and Dan Mirabella had joined Brevan Howard in New York in May from hedge-fund firm Galtere Ltd., according to a person with knowledge of the matter. The pair joined Louis Bacon’s $12 billion hedge-fund firm, Moore Capital Management LLC., this month, the person said. Todorova and Mirabella didn’t respond to voice-mails left on their mobile phones. A spokesman for Moore Capital declined to comment.

European Rates

Other traders to leave Brevan Howard include Luke Ding, who managed a currency fund with $570 million of assets, and Richard Armes, a former Morgan Stanley (MS:US) managing director who traded interest rates, according to people with knowledge of the matter and corporate filings.

While Brevan Howard’s Master fund is known as a macro hedge fund that primarily makes wagers on interest rates based on global macro-economic trends, it also invests in currencies, stocks, corporate bonds and other assets.

The loss in June stemmed “mainly” from trading interest rates, particularly in Europe, the firm said in a July statement to investors.

The 3 percent gain for Brevan Howard’s Master fund in the first seven months of the year compares with an average loss of 0.95 percent for macro hedge funds, according to Chicago-based Hedge Fund Research Inc. Hedge funds broadly have risen 4.8 percent in 2013, Hedge Fund Research data shows.

Credit Catalysts

Brevan Howard has two other funds focused solely on credit, including investments in mortgage securities and collateralized debt obligations. The Brevan Howard Credit Catalysts fund, run from New York by David Warren, a former head of structured credit at Morgan Stanley, gained about 6 percent in the first seven months of this year.

Alan Howard, 49, started Brevan Howard in 2002 with four traders from Credit Suisse Group AG’s (CSGN) proprietary fixed-income desk. The Master Fund has produced an average gain of about 12 percent per year since it started trading in 2003 and has never posted an annual loss.

To contact the reporters on this story: Jesse Westbrook in London at jwestbrook1@bloomberg.net; Lisa Abramowicz in New York at labramowicz@bloomberg.net

To contact the editors responsible for this story: Edward Evans at eevans3@bloomberg.net; Alan Goldstein at agoldstein5@bloomberg.net


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