Thursday, January 12, 2012

Yes, Obsessing Over Tails, Black Swans Pays Off


From Bloomberg: When Alan Howard set off for a business trip to India as a young Salomon Brothers bond trader in the late 1980s, colleagues advised against drinking local water. When he got back, the buzz on his trading desk was about the huge tab Howard had run up buying cases of Evian water, according to a person who worked with him at the time.
The London native joked that he not only didn’t drink from the tap, he used the imported bottled water to bathe, shave and wash his hair.

Today, the co-founder of the $32.6 billion hedge-fund juggernaut Brevan Howard Asset Management LLP still makes it his business to keep out of harm’s way. From Howard’s trading desk in Geneva, former colleagues say, he obsesses daily about fat- tail risks, black swans or the mere possibility that his economic outlook may be wrong.

In 2011, Howard’s risk aversion served him well. The $26.4 billion Brevan Howard Master Fund Ltd. returned a solid 10.8 percent for the 10 months ended Oct. 31, ranking the fund No. 20 in the Bloomberg Markets ranking of the 100 best-performing hedge funds. The firm had three other funds on the large-fund list: the $1.7 billion Brevan Howard Asia Master Fund Ltd., at No. 31 with a 7.2 percent return; the $1.3 billion Brevan Howard Multi- Strategy Master Fund Ltd., tied at No. 43 with a 5.5 percent return; and the $2 billion Credit Catalysts Master Fund Ltd., tied for No. 74 with a 3.2 percent return….

Wait, wait...there's more at http://www.bloomberg.com/news/2012-01-12/brevan-howard-proves-master-of-hedge-funds-with-four-in-top-100.html

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