London-based Brevan Howard filed an Aug. 9 private- placement notice with the U.S. Securities and Exchange Commission to raise an unspecified amount of assets for its Macro FX fund. The $1 billion currency fund is managed by Luke Ding, a former Merrill Lynch & Co. foreign exchange trader who joined Brevan Howard in 2007.
Brevan Howard is boosting its profile in the U.S. as surveys show American pension funds and endowments are more bullish on hedge funds than their European counterparts. Brevan Howard announced last month that it had opened a New York-based investment firm, and the hedge fund formed a partnership this year with the Pennsylvania Public School Employees’ Retirement System to buy mortgage-backed securities.
Brevan Howard officials declined to comment.
U.S. pension funds, endowments and other hedge-fund clients said their investments in the industry would grow by 15 percent this year, down from an estimated 17 percent increase in 2011, according to a Goldman Sachs & Co. (GS) survey published in May.
U.K. clients predicted their investments would appreciate by 14 percent this year, down from 20 percent in 2011. French investors estimated growth of 7 percent, compared with 25 percent a year earlier, and Scandinavian investors predicted an increase of 5 percent, down from 26 percent in 2011, according to New York-based Goldman Sachs. U.S. respondents surveyed by Goldman Sachs managed about $668 billion, while European investors oversaw $559 billion.
Brevan Howard, which managed $36.7 billion at the end of June, started Ding’s Macro FX in 2009. The fund has produced an average annual gain of 3.6 percent since its inception in November 2009 through June of this year, compared with a 3.7 percent rise for the broader industry, according to data compiled by Bloomberg and Chicago-based Hedge Fund Research Inc.
Other hedge funds that trade currencies based on global economic trends produced an average annual loss of 0.9 percent from November 2009 through June of this year, the most recent data available from Hedge Fund Research. Such funds have been hurt by wagers that the European sovereign-debt crisis would lead to a plunge in the euro.
That bet hasn’t paid off as intervention by politicians has triggered temporary surges in the single currency’s value over the course of its 14 percent slide against the U.S. dollar since the end of 2009.
Brevan Howard is seeking minimum investments of $1 million for its currency fund, according to the filing. The private- placement notice it filed allows a hedge fund to raise money without going through the SEC’s registration process, based on the regulator’s view that potential investors are sophisticated and able to fend for themselves.
The 2010 Dodd-Frank Act required U.S. hedge-fund managers to register with the SEC this year, which subjects the firms to routine agency inspections and requires disclosure of leverage and investment positions to regulators.
While BlueCrest Capital Management LLP and Winton Capital Management LLC, the third-biggest and fourth-biggest European hedge funds respectively, are registered, Brevan Howard’s main investment advisory unit isn’t, according to the SEC website. The Brevan Howard unit isn’t required to register with the SEC.
Brevan Howard U.S. Investment Management LP, the New York- based affiliate Brevan Howard set up in June, is registered with the SEC. The U.S. firm will invest on behalf of Brevan Howard’s biggest hedge fund, the Master fund, and currently manages about $800 million, according to an Aug. 1 filing with the SEC.
The $26 billion Master fund, which had fallen 1.3 percent this year through July 20, hasn’t posted an annual loss since its inception in April 2003. Howard, 48, founded Brevan Howard in 2002 with four other fixed-income traders from Credit Suisse Group AG.