Macro strategies have underperformed since 2008, but Ian Plenderleith, chairman of BH Macro Ltd argues that while other hedge funds are just investing to have something to do Brevan Howard has the right setup to take advantage of macro opportunities when they do start to show up again.
“Many hedge funds feel they have to be hyperactive, that they’ve got to be doing something the whole time. But if the opportunities are not there, that just means you’re putting a lot of effort into losing money,” says Plenderleith in an interview with Bloomberg Briefs.
Brevan Howard’s three winning traits: Plenderleith
As head of a publicly traded feeder, Plenderleith is by no means disinterested in Brevan Howard’s performance. While the two funds are completely independent, BH Macro invests all of its shareholders’ money (currently $2.1 billion) into the Brevan Howard’s master fund, giving individual investors a way to add alternative exposure to their portfolio. So while he isn’t involved in Brevan Howard’s investment process, his fund is completely dependent on Brevan Howard’s decisions.
Asked why he can put so much trust in Brevan Howard, aside from the fact that it has produced positive returns for the last seven years including the bulk of the recession, Plenderleith says that it has three characteristics that set it apart: a deep bench of economic analysts, more than 50 traders working independently (though within firm guidelines) to construct strategies, and high quality risk management. It’s a slightly generic list, but he says that most investment firms that haven’t done well have skipped one of those three steps.
Brevan Howard’s Plenderleith: Macro predictions for developed markets
Looking ahead, Plenderleith is bullish on the US economy, saying that there is strong growth ‘underneath’ and that the recovery will only accelerate, probably driving a steeper yield curve and stronger dollar. He also thinks that the UK economy is finally starting to recover, which puts the Bank of England in the difficult position of needing to time interest rate rises without killing the nascent recovery.
But Plenderleith is less optimistic about the rest of the EU, pointing out that the banking system still needs support from the ECB and that many countries still have to get their budgets under control. He doesn’t have a strong opinion on whether the Japanese government will need to do more to stimulate the economy and prevent another fall back into deflation.