Hedge Fund Closure: Nice Bet Mr Brevan Howard

The third-largest hedge fund in the world has created value for its investors yet again through the recovery in mortgages over a two-year period. Through a $385M investment in an arm of the Brevan Howard Master Fund, Brevan Howard placed successful bets on the mortgage crisis of 2008 coming to an end. Excellent timing saw this investment come to fruition early, and the hedge fund will now begin paying off investors.

The strategy behind the investments was based upon the fact that mortgage-based assets in the United States were lagging behind the rest of the economic recovery in the country. Brevan Howard jumped on the opportunity to offer its investors to lock in their money on a directional bet on these mortgage-based assets. For anyone smart enough to take them up on the offer, a 20% return was the reward. Staggered returns actually increased the overall profit margin to around 35% and 40% on the two separate tranches that the fund created.

The Brevin Howard Master Fund is a good place to leave money. It has never actually lost money in a calendar year. Overall, it has generated over $17 billion worth of profit for its investors. It even performed well during the height of the recession in 2008 because of the ability of Mr. Howard to anticipate the crash. A large portion of the fund was placed in cash during this time, saving the investment of those who had chosen to place money in the fund before 2008. The only aspect of the fund that had lost money was the emerging market portion, and only in a single year, 2013.

The fund was founded by Alan Howard in 2002. Full holdings of the fund included around $37 billion in assets at its height. The part of the fund that is being used to pay off investors from the success in mortgage-backed industries will be paid down; however, the rest of the fund will continue to invest in other aspects of the recovery. Mr. Howard maintains a very hands-on approach to all aspects of investing in the fund.


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