Brevan Cuts Fees for Biggest Fund to Make Up for High Costs

(Bloomberg) -- Brevan Howard Asset Management cut fees for its biggest fund to make up for technology, infrastructure and talent expenses that pushed pass-through costs too high.

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The firm is scrapping the 1% management fee for its Alpha Strategies fund until the new year, according to people familiar with the matter. Brevan earlier this year dismissed about 100 employees in a second round of cuts that were part of a broader restructuring to manage expenses.

Many multistrategy funds have faced fierce competition for talent, forcing them to pay up for new hires and contributing to rising fees that have weakened investor demand. A recent BNP Paribas SA report found that the most expensive multistrategy funds are now keeping most of the profits they generate, while clients shoulder their costs.

In January, the Alpha Strategies’ management fee at Brevan will rise to 0.5% for one quarter, before reverting back to 1% in April. The firm expects its expenses will have dropped before then, one of the people said, asking not to be identified discussing private information. The fund also charges a 15% performance fee and passes through various expenses to clients.

At $12.2 billion, Alpha Strategies — which lost 3.6% this year through May — is the firm’s biggest pool. Close behind is its $11.9 billion flagship fund, Brevan Master. Last year, Alpha Strategies gained 2.4%, while the Master fund slumped 2.1%.

A representative for the firm, which manages about $35 billion, declined to comment.

Brevan told investors about the fee adjustment earlier this year during the firm’s restructuring, and it came into effect July 1.

--With assistance from Shelley Robinson.

(Updates to include additional fund performance in the fifth paragraph. A previous version corrected the performance fee.)

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