Brevan Howard Global Limited, Europe’s second largest hedge fund company, reports that their Master Limited Fund, the flagship hedge fund of the company, is down 2.22% for the month of June. As we reported, the fund was down 1.7% for May. Year to date, the fund is down 3.6%. Assets under management now total approximately $37 billion.
The report issued from the company suggests that most of the losses were due to interest rates trading in directional positions, and volatility positions, as well as FX macro trading. There were also some small losses incurred in equity macro trading.
Other funds in the company also suffered losses last month, including their BHEML fund, which lost 0.13%. Brevan Howard states that foreign exchange with Latin America produced a positive performance, while they suffered losses in FX trading to Europe.
The fund announced the establishment of a new US based investment manager, Brevan Howard US Investment Management LP, with over $300 million in assets.
CEO Alan Howard blames a soft U.S. economy for its losses in June, stating that economic downturn caused a weakened household consumption, while manufacturing has slowed, and projections indicate a contraction in the coming months. Brevan Howard’s report also indicates that Europe will suffer even more withdrawal and weakening in the coming months, which gives a dour outlook for their European assets. Europe now has an 11.1 % unemployment rate, while the growth rate of loans to both firms and households has slowed.
Brevan Howard is just one of many companies affected by the downturn, yet it is one of the biggest, in terms of asset management. Sources say that the company is concerned at the rate at which unemployment is dropping, while temporary fixes to the financial woes in Europe seem to be more uncertain every day. When you add all of this to the growing volatility in the Middle East, then you have a mix for a very poor market.
One major concern for the top executives at Brevan Howard is that the U.S. will experience a major Fiscal drag for this year. Rising taxes, high unemployment, and budget cuts across the board spell poor trading in the coming weeks and months. Even if the Fiscal drag were to be cut in half, it would still leave a very noticeable impression in trading.
The bottom line is,that while Brevan Howard lost in the month of June, its leaders have set themselves stoically to face the rest of the year. They will likely be very bearish in their market activity in the coming months. The global effect of a slowing economy is taking its toll on everyone it seems.