Q&A: Brevan Howard’s Charlotte Valeur Talks Strategy

Sep 18 2014 | 11:18am ET

Charlotte Valeur chairs the board of Brevan Howard Credit Catalysts, an LSE listed company investing in the $4.9 billion Brevan Howard Credit Catalysts Master Fund.

BHCC, which invests in a broad spectrum of credit opportunities, is run by David Warren whose eponymous investment management firm spun out of BH in 2009. Warren and his 44-person team are based in New York, where they also run the BH Credit Value Fund.

Valeur has 30 years' experience in the financial services industry, ranging from floor-trading on the Danish Stock exchange to investment banking in London to running her own alternative investment funds start-up consultancy. She sits as a non-executive director on a number of boards where she is especially interested in issues of corporate governance. Valeur recently spoke with FINalternatives' Mary Campbell about the BHCC.

What is the strategy of the Brevan Howard Master Catalysts Master Fund?

They invest in a range of different credit strategies... They do mortgage and asset-backed strategies, they have a distressed strategy, they have corporate structured credit and performing long/short investments... They go into various places of the capital structure of a company and they generally go in through debt—at times there might be some stock that goes along with the debt but generally it's through debt.

How has the fund performed?

In the dollar share class for this year, up until the end of June, they were up 7% and all of last year they were up 13.5%, and the year before that 14.8%. Very good returns. They win more than they lose by about one-and-a-half times, and because of the risk oversight over how they take positions and the liquidity that they require to make sure they can go in and out, they continue to be able to find these opportunities where they can go in and make these kind of returns.

Where does the fund currently see opportunity?

This year, so far, around three-quarters of the returns have been coming from mortgage- and asset-backed positions. The feeling is that there is increased corporate activity going on and that will provide opportunities...basically for the performing long/short strategies. Generally, I would say, they are optimistic...and I know that they are looking to add to commercial real estate.

The master fund runs $4.9 billion, what are the advantages and disadvantages of being that size?

The team at DWIM are quite a good-sized team, they have been in this market for years, and the advantage is that they always know where to look for positions and with the size they have now, they will often be the first call when someone has something they want to trade.

The disadvantage is if your positions get too big and you want to go out, everybody knows about it, but because they are diversifying so broadly, that has never been an issue. No positions are more than 5% of the total so they never get these big lumps of huge positions that brought someone like Long Term down in the late '90s—{LTCM was] very, very concentrated, this fund is never concentrated.

Is there an optimal size for the BH Credit Catalysts Master Fund?

I think we might not be that far away from an optimal size, to be honest. The broadness of the market for trading means they can still find opportunities that are providing enough liquidity that they're happy to go into them...I don't think they're in a hurry to take more money in, they're happy to be where they are, so we might not be that far away from where they think it's enough.

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