Brevan Howard Shutters Hedge Fund With Manager on Sabbatical

(Bloomberg) -- Brevan Howard Asset Management liquidated an Asia macro hedge fund because its manager, Kaspar Ernst, is taking a sabbatical.

The money pool, which Ernst ran for 15 years, managed $468 million at the end of November and was wound down at the end of last year, according to a person with knowledge of the matter. Brevan Howard is in the process of returning capital to investors this month, said the person, who asked not to be identified because the information is private.

A spokesman for the Jersey-based investment firm co-founded by billionaire Alan Howard declined to comment.

At his peak, Hong Kong-based Ernst managed about $3 billion in what was one of Asia’s largest and longest-running macro hedge funds. He never had a negative year, and returned just under 7% on an annualized basis since the fund began trading in 2004, the person said.

Sabbaticals are relatively rare in the fiercely competitive hedge-fund industry, although some managers are able to take a break to travel the world or spend time with family. For example, Nick Granger, then a portfolio manager at Man Group Plc, took a year-long sabbatical in 2018 to study philosophy. He later joined Pacific Investment Management Co. Ernst wants to spend time with his young family, the person said.

On the Mend

Ernst will remain linked to Brevan Howard and will be on its risk oversight committee, the person said. He’s expected to return to manage money for the firm in due course.

The macro fund joins the more than 4,000 peers that have closed down in the last five years, as the $3 trillion industry faces an investor revolt over high fees and mediocre returns. More funds have shuttered than started since 2015.

Brevan Howard, which has seen its assets decline to about $7 billion from a peak of more than $40 billion in 2013, is on the mend, with its flagship hedge fund winning back clients after posting a second straight annual gain in 2019.

Ernst was one of the few traders who kept their strategies running at Brevan Howard after the firm decided to shut more than half a dozen hedge funds in the three years through 2015 to focus on its flagship strategy. The firm then changed course, allowing some of its top traders to run their own funds in a bid to attract assets and retain talent.

Minal Bathwal, who has worked for Ernst since 2008 and helped him manage the fund, started his own Asia-focused macro fund at Brevan Howard in May 2018, the person said. The MB Macro Fund has grown to manage more than $1 billion and was up 10.6% in 2019.

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