03/11/2009

Brevan Howard Eyes Morgan Stanley Clients

Brevan Howard Asset Management is set to hire Morgan Stanley to market the giant hedge fund operator's vehicles to the bank's institutional clients.

Brevan Howard already has a prime-brokerage relationship with Morgan Stanley, but the marketing deal would go beyond the standard services the investment bank provides to the London firm. Morgan Stanley would market Brevan Howard funds through multiple channels, not just its prime-brokerage unit.

While prime brokers typically don't charge for capital-introduction services, Brevan Howard would pay Morgan Stanley a fee for referrals to institutional clients. The bank hopes the deal will pave the way for more fee-based cap-intro business.

Brevan Howard, which has about $26 billion under management, posted big gains last year, even as most fund operators were suffering steep losses. Nonetheless, the firm was hit with redemption requests for about 20% of assets across all of its funds.

The tentative deal with Morgan Stanley appears to stem from conversations between John Mack, the investment bank's chief executive, and Brevan Howard founder Alan Howard. The two worked together when Mack was CEO of Credit Suisse First Boston and Howard ran proprietary interest-rate trading for the bank. Howard left Credit Suisse in 2002 to launch Brevan Howard amid efforts by Mack to rein in costs, including compensation.

Brevan Howard's flagship vehicle, the $15 billion global-macro Brevan Howard Master Fund, was up more than 20% last year. The firm also runs Brevan Howard Equity Strategies Master Fund, Brevan Howard Asia Master Fund, Brevan Howard Emerging Markets Strategies Master Fund and Brevan Howard Strategic Opportunities Fund. In addition, it has two exchange-listed funds, BH Macro, which invests in Brevan Howard Master Fund, and BH Global, which holds shares of a Brevan Howard vehicle that invests only in other Brevan Howard funds.

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