Brevan Howard Asset Management has ended a relationship with US hedge fund firm Commonwealth Asset Management after a money pool it advised on suffered losses last month.
(Bloomberg) — Brevan Howard Asset Management has ended a relationship with US hedge fund firm Commonwealth Asset Management after a money pool it advised on suffered losses last month.
Brevan Howard terminated the arrangement, which was structured as a so-called separately managed account that had about $1 billion in assets at the end of February and followed a Commonwealth strategy, according to people familiar with the matter and documents obtained by Bloomberg. The decision followed a steep drop in the macro trading money pool in March as a result of wrong-way bets on short-term interest rates, the people said.
A separate Commonwealth hedge fund following a similar strategy to the Brevan Howard account lost about 17% in March, but has recouped the majority of those losses this month, according to another person with knowledge of the matter, who asked not to be identified because the information is private.
Brevan Howard’s decision, which came after the firm’s master fund posted a record monthly decline, shows the damage suffered by so-called macro traders in March, when the collapse of Silicon Valley Bank triggered violent market swings and upended their bets tied to short-term interest rates.
A representative for the Jersey, Channel Islands-based Brevan Howard, which manages more than $31 billion, declined to comment. A representative for Commonwealth said the losses were concentrated in a rates strategy run by a trader the firm hired last year as the bond market turned volatile. The firm, overseen by founder and Chief Investment Officer Adam Fisher, declined to identify the trader or comment further.
Macro investors, who use borrowed money to inflate their wagers on economic trends, faced moves that topped those caused by the collapse of Lehman Brothers Holdings Inc., the Al Qaeda attacks in 2001, the bursting of the dot.com bubble and emerging-market crises of the 1990s.
Some famed money managers from Chris Rokos to Said Haidar suffered double-digit losses, while veteran macro trader Adam Levinson shut down his hedge fund after being hit by losses during the bond market volatility.
Brevan Howard’s main master fund, which holds about $11 billion, lost 4.2% overall in March — its biggest-ever monthly decline since its launch in 2003.
“Losses were primarily driven by directional exposure to US rates, in particular front end,” Brevan Howard wrote in a letter to investors sent this month.
Property Developer
Fisher, a property developer prior to the 2008 financial crisis, began making macro trades on his own to hedge his holdings and profit from the looming housing collapse. Eventually he formed asset manager CommonWealth Opportunity Capital, which grew to more than $2 billion and counted George Soros as a client, Bloomberg previously reported. After a stint at Soros Fund Management ended in 2019, he revived Commonwealth under a slightly different name.
Fisher warned of upheaval in world markets just last year, predicting that the decline of global political stability could make a fertile hunting ground for macro traders.
“There have always been Cassandras talking about this, but now I think it’s visible,” Fisher said in a May 2022 interview with Bloomberg.
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Commonwealth oversaw about $2 billion in total heading into March, according to the document. Alan Howard, Brevan Howard’s billionaire co-founder, owns a stake in Commonwealth, Bloomberg has reported.
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