Mastering the Storm: How Brevan Howard Macro Fund Navigated 2025's Geopolitical and Policy Chaos

In 2025, the world's markets faced a perfect storm of geopolitical tensions, shifting trade policies, and central bank uncertainty. Yet, while many investors scrambled to weather the turbulence, Minal Bathwal's Brevan Howard Macro Fund emerged as a standout performer. The fund delivered a 9.8% return in the first half of 2025, outpacing not only its parent firm's larger funds but also a broader hedge fund index. This resilience, achieved amid a 40% probability of a U.S. recession and a 10-point surge in effective U.S. tariffs, underscores the power of strategic macro investing in a fractured global economy.

The Volatility of 2025: A Year of Policy Shocks and Geopolitical Fractures

The first half of 2025 was defined by three seismic shifts:
1. U.S. Trade Policy Overhaul: Tariffs on key imports—particularly from China, Vietnam, and the EU—spiked to levels not seen since the 1930s. The average effective tariff rate hit 18.2%, driving up consumer prices and squeezing household budgets.
2. Geopolitical Tensions: Conflicts in energy markets and Middle East instability heightened uncertainty, while U.S.-China trade tensions saw retaliatory tariffs escalate to 104%.
3. Central Bank Divergence: The Fed's cautious stance (no rate cuts until December) contrasted with aggressive easing in Europe and Japan, fueling dollar weakness and cross-border capital flows.

These factors created a volatile environment where traditional asset classes faltered. The S&P 500, for instance, saw a 4% pullback in March amid Trump's tariff announcements, while the dollar index (DXY) dipped to 102.5—a 12-month low. For macro hedge funds, however, such volatility presented opportunities.

Brevan Howard's Strategy: Diversification, Agility, and Deep Macro Insight

Bathwal's fund thrived by leveraging three core principles:
- Diversification Across Sectors and Geographies: The fund's exposure to commodities (gold, copper), currencies (euro, yen), and global macroeconomic trends allowed it to capitalize on divergent growth trajectories. For example, as the dollar weakened, the fund's long euro positions and short dollar/CNY bets gained traction, aligning with J.P. Morgan's forecasts of 1.20–1.22 for EUR/USD and 7.10 for USD/CNY.
- Active Leverage and Risk Management: By deploying leveraged positions in undervalued assets and hedging against sector-specific risks (e.g., tariffs on copper), the fund minimized downside exposure. Its low correlation to equities and bonds—highlighted by BH Macro's chairman—ensured returns with less volatility.
- Policy-Driven Positioning: The fund anticipated the U.S. Treasury market's shift as fiscal deficits ballooned and term premiums rose. By shorting long-dated Treasuries and going long on inflation-linked bonds, it capitalized on the 25-basis-point Fed easing in December and the broader yield curve twist.

Navigating Tariff Chaos: A Case Study in Copper and Currency Markets

One of the fund's most notable moves was its response to Trump's 50% copper tariff, announced in mid-June. While the move initially spiked LME copper prices to $9,350/mt, the fund anticipated a post-substitution correction. By shorting the MWP (Midwest premium) and hedging against U.S. demand shifts, it locked in gains as prices stabilized. Similarly, its exposure to the yuan (CNY) benefited from China's retaliatory tariffs and the currency's 1.6% appreciation against the dollar.

The Power of Share Buybacks: A Tailwind for Performance

Beyond market positioning, Brevan Howard's board executed a £116 million share buyback program in 2024, narrowing the fund's discount to NAV from 11.1% to 7.8%. This accretive strategy added 0.98% to the Sterling class NAV return, demonstrating how corporate governance can enhance investor returns in volatile markets.

Lessons for Investors: Why Macro Hedge Funds Matter in 2025

The Brevan Howard Macro Fund's success highlights a critical insight: macro hedge funds are uniquely positioned to profit from geopolitical and policy-driven volatility. Unlike traditional asset managers, they can:
1. Anticipate Policy Shifts: By modeling the ripple effects of tariffs, trade deals, and central bank actions.
2. Exploit Currency and Commodity Arbitrage: Leveraging divergences between the U.S. and global economies.
3. Diversify Portfolios: Offering low-correlation returns that buffer against equity and bond market downturns.

For investors, this means allocating a portion of portfolios to macro strategies—particularly in an era where U.S. exceptionalism is fading and global imbalances are rising.

The Road Ahead: Challenges and Opportunities

While the fund's first-half performance is impressive, risks remain. The U.S. dollar's structural weakness, coupled with the potential for further trade wars, could test macro strategies. However, the fund's agility and Bathwal's expertise position it to adapt. As Jay Barry of J.P. Morgan notes, the U.S. dollar's bear case remains intact, with euro/dollar and dollar/CNY targets suggesting further gains for well-positioned funds.

Conclusion: A Blueprint for Resilience

The Brevan Howard Macro Fund's 9.8% return in H1 2025 is more than a number—it's a testament to the value of macro investing in turbulent times. By combining deep policy analysis, strategic diversification, and disciplined risk management, the fund has set a benchmark for navigating the geopolitical and economic challenges of 2025. For investors seeking to weather the next storm, the message is clear: macro hedge funds are not just a niche—they are a necessity.