In an industry infamous for furious rifts, bruised egos, messy business divorces and vicious litigation, the partnership between Brevan Howard Capital Management LP and its protege, DW Partners LP, is one of the few to end amicably.
On Jan. 1, New York-based DW Partners assumed full control of $5.8 billion in credit strategies it subadvised for Brevan Howard, the British hedge fund giant.
DW Partners legally became the investment manager for the assets, in two LP vehicles for two credit hedge fund strategies, said David Warren, founder and chief investment officer.
DW was launched in 2009 with backing from Brevan Howard and eventually managed two credit hedge fund strategies bearing the Brevan Howard name: Credit Catalysts, with assets totaling $4.75 million as of Sept. 30, and Credit Value, which ran $900 million as of the same date.
With minimal fuss and the blessing of more than 90% of the 150 external investors invested in the credit limited partnerships, the transfer was made and the LP funds were renamed effective Jan. 1.
Brevan Howard retained $1.5 billion in DW credit strategies and continues to use DW as a manager for some of its hedge funds. Brevan Howard also took a minority stake in DW Partners. Mr. Warren declined to give the size.
The balance of the $6 billion DW managed as of Jan. 1 is from external clients.
On the surface, the two firms could hardly be more different. Mr. Warren was an experienced credit trader who ran a 300-person proprietary bond trading desk for Morgan Stanley before leaving in 2008. He always specialized in “complexity,” focusing on corporate, structured and asset-backed securities, investments that generally require a long holding period, often several years, to achieve full valuation, he said during a recent interview.
Brevan Howard Capital Management, on the other hand, runs a big global macro trading program. The firm was co-founded in 2002 by Alan E. Howard and four others in St. Pelier, Jersey. It also has a London-based investment subsidiary, Brevan Howard Asset Management LLP.
“Trading is not a buy-and-hold strategy,” said Nagi Kawkabani, a Brevan Howard Asset Management partner, in a 2012 interview with Pensions & Investments (P&I, Oct. 1, 2012). “Trading focuses on near-term opportunities,” he said.