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Brevan Howard targets institutional investors with absolute return bond fund

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Brevan Howard Asset Management has launched its first Ucits III fund, the Brevan Howard Absolute Return Bond Plus Fund.

Brevan Howard Asset Management has launched its first Ucits III fund, the Brevan Howard Absolute Return Bond Plus Fund.

It is an actively managed fixed-income fund focusing on high liquidity and capital preservation with minimal credit exposure and targeting net returns of cash plus 3.5 per cent.

The managers will construct a diverse portfolio of government bonds and interest rate strategies predominantly from the major liquid markets (the US, Europe, the UK and Japan) and will also have an opportunistic exposure to liquid foreign exchange strategies. The fund has been seeded by the Brevan Howard group with assets of USD250m.

‘This fund should appeal to large institutional investors who are looking to allocate a part of their portfolio to alpha managers who can deliver absolute returns with low volatility and low correlation with other investments,’ says Philippe Lespinard, head of absolute return strategies (pictured).

‘We see this strategy sitting very comfortably alongside core bond portfolios and specialist credit strategies. We feel strongly that investors are looking for simplicity, liquidity and transparency in the absolute return field and we intend to set the standard in these areas.’

The investment team comprises Ian Winship, Philip Payne, Harry Melandri, Michael Siviter and Adrian Hilton who all joined Brevan Howard from Aberdeen Asset Management. The management team for the absolute return business are Lespinard, Keith Patton (product management), also formerly of Aberdeen Asset Management, and Jev Mehmet (operations).

‘We have hired a macro team within a best of breed macro investment manager,’ Lespinard says. ‘This dedicated team have built an excellent track record at Aberdeen and have worked together for almost five years. They have extensive experience of managing Ucits III funds and institutional portfolios with a focus on alpha, not beta plus.

‘They have full access to Brevan Howard’s proprietary research team, strategists, traders and quant specialists and are fully integrated in Brevan Howard’s operational and risk control platform. We believe that this provides a truly excellent environment within which to launch our absolute return offering.’

The fund is structured as a Luxembourg Icits III Sicav. The investment manager is Brevan Howard Asset Management (UK), the custodian and administrator is J.P. Morgan Bank Luxembourg, and the auditor is KPMG Audit.

The fund offers daily liquidity and share classes denominated in US dollars, euros, sterling and yen. Management fees for institutional share classes are 0.8 per cent for a USD10m minimum investment. Performance fees are 20 per cent over a hurdle rate with a high watermark. The fund will also offer wholesale share classes for distributors but will not accept subscriptions by retail investors.

J.P. Morgan is acting as global co-ordinator for distribution of the Brevan Howard Absolute Return Bond Plus Fund and will also provide fund-linked solutions to suit client-specific requirements.

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