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Brevan Said to Shut Emerging Markets Fund After Losses

Geraldine Sundstrom is leaving Brevan Howard Capital Management LP and the firm is shutting her hedge fund after it lost money amid a rout in emerging markets, according to a person with direct knowledge of the decision.

Sundstrom’s Brevan Howard Emerging Markets Strategies Master Fund declined 15 percent last year after a sell off for bonds and currencies, said the person, who asked not to be identified because the matter is private. Her fund, which had $2.7 billion in assets as of last June, fell another 1.6 percent in January after investor concerns that emerging markets would continue to decline, the person said.

Emerging-market stocks have posted their worst start to a year since 2009, as China’s economy slowed and the devaluation of the Argentine peso accelerated the selloff. Sundstrom, 39, is among managers who’ve been hurt by the market turmoil, which has been exacerbated by concerns that the U.S. Federal Reserve would continue reducing its monthly bond buying.

Sundstrom, who is based in Geneva, didn’t return a phone call seeking comment on her departure, which was reported earlier today by the Wall Street Journal. Officials at Brevan Howard, which is led by former Credit Suisse Group AG fixed-income trader Alan Howard, declined to comment.

Sundstrom’s Returns

Sundstrom has produced an average annual return of about 3.6 percent since 2007 when she joined Brevan Howard, Europe’s largest closely held hedge-fund firm with $40 billion of assets, according to a fund-performance report. She previously worked at Louis Bacon’s Moore Capital Management LLC for four years and before that as an investment analyst at Citigroup Inc., her registration with the U.K.’s Financial Conduct Authority shows.

Brevan Howard, based in St. Helier on the island of Jersey, historically cut risk and took capital away from traders whose portfolios fell 4 percent, Bloomberg Markets Magazine reported in 2009. An 8 percent loss triggered a change in a trader’s mandate and Brevan Howard required those who lost 12 percent to stop trading entirely.

The risk controls have contributed to the Brevan Howard Master Fund, the firm’s biggest with about $28 billion under management, never posting an annual loss since it started trading in 2003.

Risk Lowered

While trading rules at Brevan Howard aren’t as stringent for investing in more volatile emerging markets, the firm did cut Sundstrom’s risk by more than half last June after her fund started the year by falling about 11 percent, Bloomberg News reported at the time, citing two people with knowledge of the matter. She lowered risk by selling holdings and reducing leverage, the people said.

Sundstrom’s losses started piling up last May after then Federal Reserve Chairman Ben S. Bernanke said the central bank would scale back its asset purchases if U.S. employment data continued to improve. His statements fueled investor concerns that Asian and South American countries would no longer offer relatively low risk in return for higher-yielding assets, if the Fed wasn’t backstopping the global economy.

Brevan Howard’s Master Fund, which primarily trades interest rates based on macroeconomic trends, gained 2.6 percent in 2013, while its main credit hedge fund rose 14 percent and the firm’s Asia focused fund increased about 12 percent, said a person with knowledge of the matter. Hedge funds on average gained 7.4 percent last year, data compiled by Bloomberg show.

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