Brevan Howard Global Limited’s, Europe’s second largest hedge fund company, flagship hedge fund, Brevan Howard Master Limited, is up 2.31% for July according to a letter obtained by ValueWalk. This is a stark contrast to the 2.2% loss in June. Year to date, the fund is down 3.6%. Assets under management now total approximately $37 billion.

Brevan Howard

The fund announces that Partner Chris Rokos will be exiting the company ‘to pursue his personal interests.’  Rokos helped cofound the fund nine years ago. The company does not state what Rokos will be doing next.

Most of the Macro limited hedge fund’s gains came from interest rate trades, primarly directionally positions on the US dollar and Euro rates curve.  Other gains came from being long on interest rate volatility positions, mostly the sterling pound .  Other gains were generated in credit and currency  positions.

Alan Howard, the CEO of the $37 billion hedge fund, shares his macro views every month. Howard has become increasingly bearish over the past few months.

In regards to the US, Howard notes the following trends in July:

Wage growth is decelerating, manufacturing is slowing as is real consumption.

The ISM indicates further weakness in the coming months.

Although housing recovery is strong, it is not enough to offset the soft patches in the rest of the economy. He notes the fiscal cliff, which will unlikely be solved any time in the near future, and thinks the Federal Reserve will announce further easing at its September FOMC meeting.

In Europe, the crisis has spread from the periphery to the core European countries. He notes that  PMI orders in Germany are down to 44.2, which is close to the Euro average of 44.0. credit growth has viritually stopped in the Euro-Zone. Howard mentions that the ECB has mentioned the severity of the crisis but has not taken concrete actions to solve it.

The UK is weakening, as can be noticed by GDP numbers and other surveys. This is especially worrisome for a country which has had interest rates at close to zero for three years and quantitive easing equal to one third of the country’s GDP. Banks’ lending to firms and individuals has been close to zero for three years. The economy shows no signs of growth in the forseeable future. Inflation is falling too quickly, and the Bank of England will likely take further easing actions in November to stimulate the economy. The Budget forecast will not be met, and the Government will continue to implement its austerity policy.

In regards to Japan, PMI has slowed to the lowest levels since September 2011. The PMI key export orders component fell to an extremely low level of 43.0.  Additionallu, industrial production contracted by a huge 8.4% quarter-on-quarter annually, compared to the Q1. Political uncertainty is only making things worse for the world’s third largest economy.

Finally, Howard thinks that the Chinese economy is stabilizing. However, the country still faces problems as property prices rose in July, which continues to inflate costs. Inflation is subdued, but exports are at the second lowest level since February 2009.

Overall, Alan Howard has become much more concerned about the US economy, and sees very little positive economy signs anywhere besides China.