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Brevan Howard demands fee increase but has it shot itself in the foot?

Biotech trusts top performance charts in February

Brevan Howard demands fee increase on BH Macro – but has it shot itself in the foot?
David Brenchley, Investment Week, 25 January 2021

BH Macro, alongside its sister fund BH Global, published a letter from investment manager Brevan Howard, who said they wanted the fee structure reset to 2%/20%, reversing concessions previously agreed in 2016 and 2017.

Brevan Howard said it wants the fixed fee paid by the two investment companies to double to 2%, alongside an extension of the notice period the boards would have to give the manager if dispensing with its services to 12 months, from three months currently.

The firm also wants a fee of 2% of the purchase price paid to the manager on any share repurchases of 5% of opening share capital – the annual allowance for each calendar year;

In addition, it want a mandatory liquidation vote for shareholders if NAV is less than $300m at the end of any calendar quarter, with 2% of NAV paid to the manager upon liquidation if such a vote is passed.

The changes mean the trusts’ fees moving broadly back to where they were they were before 2016. At the time fees were reduced, Brevan Howard CM had seen its AUM plunge from a peak of $40bn to around $6.5bn after a period of poor performance.

The current fixed fee paid by the trusts of 1% are based on the NAV immediately after a tender in April 2017, which broker Numis calculated to be around £365m. This means the current base rate is effectively 0.65% of net assets, which have since grown to around £560m, plus a 20% performance fee…


Analysts criticised Brevan Howard’s demands for a fee put on redemptions and capital returns, with QuotedData’s senior analyst Matthew Read calling it “nothing short of egregious and self-serving”.

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