FSa aAa Hab Ba Ha a $27 bhs h2008 s 20—by bs a ys hhy s y.

By RichaRd TeiTelBaum Tom cahill

InsIde

europe’s BIggest

hedge Fund

FiRm

Brv hwr

 i L fci J.

bloomberg markets

may 2009

bloomberg markets

may 2009

is drained leaps up to pour more.Howard’s allergy to hazards of allkinds paid o last year for his business—managing Europe’s biggest hedge fundrm. In February 2008, he began raisingcash, betting that the housing downturnin Europe and the U.S. would cause cred-it markets to seize up. By the end of the year, he had cut his portfolio of bondsand other securities to $10 billion from$50 billion and was 85 percent in cashand short-term securities versus the nor-mal 65 percent.Partly as a result of these changes, theBrevan Howard Master Fund Ltd. made a20.4 percent return in a year when theaverage hedge fund lost 19 percent andthe Standard & Poor’s 500 Index dropped37 percent. As he moved to cash, Howardlocked in prots from a winning bet thatthe yield curve on U.S. Treasuries wouldsteepen—that is, that the spread would widen between the yields of short- andlong-term bonds as the Federal Reservereduced its target interest rate.“Like all good traders, Alan knows the value of risk, how much risk he can takeand the availability of capital,” saysOswald Gruebel, who worked with How-ard at Credit Suisse Group AG . “That’sthe main dierentiation between a goodtrader and a bad trader, and he wasexceptional.” Gruebel, 65, a former chief executive ocer of Credit Suisse, cameout of retirement earlier this year to takeover as CEO of UBS AG across the streetin Zurich.Howard has continued his winningstreak into 2009. In the rst two monthsof the year, the Master Fund’s U.S. dol-lar–denominated Class A shares gained8.1 percent. The fund, with assets of $20.8 billion as of Dec. 31, has never hada losing year and returned 14.4 percentannualized from its April 2003 inceptionthrough the end of 2008. Brevan notchedthat record with volatility that was lessthan half that of the S&P 500. The rmmanaged a total of $27.4 billion in sevenfunds as of year-end.Howard is still bearish. The U.S. reces-sion will persist beyond mid-year, hesays. He’s focusing on the near term.

lan Howard takes few chances. The co-founder of Brevan Howard Asset Management LLP gave up down-hill skiing years ago—at least in peak season. “It’s very dangerous,” he says in his thick London accent. Nor isHoward keen on driving. A chaueur takes the wheel of his silver Mercedes-Benz to joust with London’s trac.“I see all these nutty drivers,” says Howard, 45, shakinghis head at Brevan Howard’s oces on London’s BakerStreet. “I have no interest in getting excited or upset.” As he speaks, Howard sips coee, and when the cup

Better Than Peers

Brevan Howard’s flagship fund, unlike the average hedge fund, turned a profit last year.

’03

30%150–15

Annual returns

Brevan Howard* HFRI Fund Weighted Composite Index

’04 ’05 ’06 ’07 ’08

*Brevan Howard Master Fund Class A shares in U.S. dollars. **April 1–Dec. 31. Sources: Brevan HowardAsset Management, Hedge Fund Research