Brevan Howard may seek the return of as much as $73 million it paid to Chris Rokos, one of the hedge fund’s former top traders, after he tried to start his own investment firm.
Rokos, 43, is suing Brevan Howard (Jersey) LP to void an agreement that restricts him from managing outside investors’ money until 2018, according to his lawsuit. He’s also asking the court to rule that he should still get profit allocations from Brevan Howard until 2018, even if the restrictions are lifted and he is allowed to operate his own fund.
The hedge-fund firm, which has about $37 billion in assets under management, counter-sued Rokos earlier this month, seeking an order stopping him from setting up his own investment fund and damages if the court rules Rokos breached his duties as a partner of the firm. Rokos earned about $900 million since he helped found Brevan Howard in 2002, according to the lawsuits, filed in Jersey, where the hedge fund is incorporated.
Rokos is trying to avoid his obligations “because they no longer fit in with his current wishes, yet he still seeks to retain all financial benefits conferred on him under those agreements and to exploit the high personal profile, reputation and track record that Brevan Howard has afforded him to damage its interests,” the firm said in the court papers.
Rokos sued Brevan Howard in June, saying the restrictions on him starting his own fund are “contrary to public policy and in restraint of trade.”
Alan Kilkenny, a spokesman for the trader, said Rokos has at all times kept to the terms of his contract with Brevan Howard, and declined to comment further. Anthony Payne, a spokesman for Brevan Howard, declined to comment. The case is scheduled to be heard in November.
After announcing his retirement from Brevan Howard in 2012, Rokos started a family office, based on London’s Savile Row, to manage his own money.
He helped create Brevan Howard in 2002 with four other traders from Credit Suisse Group AG’s proprietary fixed-income trading desk, including Alan Howard. The first part of the firm’s name comes from the initials of founding partners Jean-Philippe Blochet, Rokos, James Vernon and Trifon Natsis.
Rokos is “a very successful trader” who was “entrusted with a key and high-profile management role” in the firm’s largest fund, Brevan Howard Master Fund, that allowed him to build an “impressive track record,” the firm said in court papers.
That “gave him direct access to and ongoing contact with the limited pool of investors and potential investors prepared to make substantial investments through a hedge fund,” the firm said.
The Master Fund, established in 2003, had more than $5 billion in assets by the end of 2004. That grew to about $28 billion as of October 2013, the company said.
Rokos told Brevan Howard earlier this year that he hadn’t applied for regulatory approval to start managing outside investors’ money and didn’t plan to do so, according to the firm. Brevan Howard then paid him $7.3 million for his share of profits for 2013 in February, and a further $42.7 million and $23 million the following month, the document shows.
Less than two weeks later, Brevan Howard received a letter from Rokos’s lawyers challenging the restrictions in the partnership agreement, the firm said.
If Brevan Howard had known about Rokos’s “true position,” it would have considered its options before making the payments, including “withholding payment of all or part of the said amounts,” the firm said.
Brevan Howard also said it has given Rokos permission to employ current and former partners, including Blochet and Andrea French, for his Rokos Family Office.
The case is: Christopher Charles Rokos v. Brevan Howard (Jersey) LP, Royal Court of Jersey, case no. 2014/151.