Brevan Bets on Japan Stock Gains After Disappointing 2013

Brevan Howard Capital Management LP, Europe’s largest closely held hedge-fund firm, plans to bet on the direction of markets in Japan and Europe this year as the billionaire founder, Alan Howard, conceded that 2013 was “disappointing” for returns.

BH Macro Ltd., a publicly traded company that tracks the performance of the firm’s Master Fund, climbed 2.6 percent last year, Howard wrote in a letter to investors published today. The average hedge fund rose 9.2 percent in 2013, according to data provider Hedge Fund Research Inc.

The Master Fund, known for making wagers on interest rates, currencies and government debt based on the firm’s view of global economic trends, was hampered by “substantial turmoil in financial markets that lasted several months,” Howard said. Markets were roiled starting in May when then-Federal Reserve Chairman Ben S. Bernanke said the U.S. central bank may start reducing its fixed-income purchases.

Howard said his firm expects to profit this year from the Japan trade that started last year, based on the view that equities in the country will rise and the yen will fall. That outlook remains “valid” and further policy action “may cause significant moves in Japanese equity indexes, the yen and later perhaps even” government bonds, Howard said.

The firm may also look to make money by buying and selling securities related to potential European Central Bank moves to fight deflation. Such trading “seems to offer potential” in 2014, Howard said.

Brevan Howard, based in St. Helier on the island of Jersey, manages about $40 billion. Howard, 50, started the firm in 2002 with four other fixed-income traders from Credit Suisse Group AG. Brevan Howard has been expanding to trade corporate notes and asset-backed debt such as mortgage bonds, and last year added employees in New York and Hong Kong.

Max Hilton, a spokesman for Brevan Howard, declined to comment on the letter.


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