(Bloomberg) — This month’s market turmoil has helped Brevan Howard Asset Management’s flagship hedge fund swing to a profit for the year after reversing earlier losses.
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The $12 billion Brevan Howard Master Fund made an estimated 2.3% gain in the first two trading days of August, wiping out a drop in the seven months to July. It advanced 1.1% this year through Aug. 2, according to an investor letter seen by Bloomberg News.
The firm’s other large hedge fund, Alpha Strategies, made 1.4% this month, paring its decline this year to 0.2%, another letter showed.
Multiple traders manage both the funds, which make up the majority of about $34 billion in total assets overseen by Brevan Howard.
The Master fund is still recovering from last year’s 2.1% loss tied to wrong-footed bets on interest-rate cuts by the US Federal Reserve. Some macro hedge funds, including Brevan Howard, had expected the Fed to slash its benchmark this year, but Chairman Jerome Powell has held off so far, saying policymakers won’t act until they’re sure inflation is under control.
In a big shift in the macro trading world this month, investors have started to wager on a rate cut at the Fed’s next policy meeting in September. Swaps traders are even pricing in a 16% probability of an emergency reduction before next month’s meeting. That has come as a respite for some macro hedge funds that were on the wrong side of the bets earlier.
In a Jan. 23 interview with the Bloomberg Odd Lots podcast, Brevan Howard’s chief economist Jason Cummins implied that the market was underestimating the scale of cuts to come. Brevan’s Master fund lost 3.2% in February.
A representative for the Jersey, Channel Islands-based money manager, declined to comment.
Brevan Howard has been making major changes at the firm this year. It scrapped the 1% management fee for its Alpha Strategies fund until the end of 2024, shuttered hedge funds run by big-name traders Alfredo Saitta and Louis Basger, and dismissed about 100 employees in a second round of cuts that were part of a broader restructuring to manage expenses.
–With assistance from Edward Bolingbroke and Donal Griffin.
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