Brevan fund loss galling for co-founder Alan Howard

Alan Howard is not a man used to failure. Since co-founding Brevan Howard in 2003, the publicity-shy Londoner has built the hedge fund into Europe's largest, managing as much as $40bn in assets and cementing his reputation as a razor-sharp trader.

This week it emerged that Mr Howard's main $24bn fund had made a 0.8 per cent loss for its clients last year. While the amount of the loss was small compared with worse-performing rivals its symbolic importance was large - ruining Brevan's proud record of never having lost money in a calendar year since it was founded in 2003.

Once one of the best-performing hedge funds in the world, making billions of dollars during the financial crisis by correctly predicting moves in interest rates and currencies, Brevan's status as a "sure thing" among investors is under threat.

The loss last year was particularly galling for Mr Howard as it had followed a pledge by him in a letter to his investors at the start of 2014 to start making them money again. Calling the fund's 2.6 per cent haul for 2013 "disappointing", Mr Howard said he was "determined to deliver a more satisfactory outcome for 2014".

Such language has been a far cry from the triumphant days of the financial crisis, when Mr Howard's trading prowess enabled his hedge fund to make 20.4 per cent in 2008 when US stocks lost almost double that, and many other rivals went out of business.

The goodwill generated by navigating the worst market crisis in living memory in effect transformed Brevan, according to one investor, into the "IBM of hedge funds". Conservative institutional investors such as pension funds, many of whom were still apprehensive about investing in so-called "alternatives", embraced Brevan as a solid counterparty that could be trusted with their money.

While the hedge fund remained highly private, with Mr Howard's move in 2010 to Geneva from London removing him further from the City spotlight, its reputation for strict standards of risk management grew.

Mr Howard is known for letting traders go if they make losses, with the hedge fund noted for its high turnover of staff. Brevan has also lost some of its biggest money makers, with Chris Rokos, a founding partner and the "R" in the acronym Brevan, leaving in 2012. The previous year he had been responsible for making 30 per cent of the Master Fund's returns.

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Yet there have also been signs that some of the conservative institutional investors that once embraced Brevan are losing their patience with the fund.

Last year it emerged that the London Pension Fund Authority redeemed its investment in Brevan, although this was done at a point when its Master Fund was performing well.

Others remain convinced the hedge fund will recapture its past form the moment severe turbulence returns to financial markets, something it believes could be close.

Nagi Kawkabani, a partner at Brevan, told the Financial Times earlier this week he believed that global central banks' ultra-loose monetary policy would soon be proven to have succeeded or failed, and this would prompt large market movements that will allow the hedge fund to make large returns.

But there is also recognition within Brevan that the pressure is on to seize any opportunity to make money for its clients again. Only that way can its faded aura of trading invincibility be restored.

"When you are performing well you are seen as the best hedge fund, but when you have disappointing results people can be quick to say you are finished," says one person familiar with the fund. "You need to make money when the time comes. If it comes and you don't, then you have a real problem."

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