The curious reclassification of Brevan Howard's AI-driven trading team

Hedge fund Brevan Howard has been in the news for the wrong reasons this week. In what has been a difficult period for global macro funds, the Brevan Howard AH Master Fund - overseen by Alan Howard himself - has slumped 8.5% in two months. But while the world wonders how Howard will redeem himself, something curious has been going on behind the scenes.

The UK's Financial Conduct Authority (FCA) register reveals that Brevan Howard deregistered the senior scientist co-leading its AI (artificial intelligence)-driven trading team at the end of last month. Various other senior quants and members of its systematic trading team were deregistered at the same time, and at the end of January.

The six men in question were previously given the FCA's CF-30 designation. Law firm Ashurst notes that CF-30 was expanded in 2017 to cover, 'any person dealing with clients (retail, professional and ECPs).' It encompasses anyone advising on investments and performing related functions (dealing or arranging trades), anyone acting as a principal or an agent, and anyone acting as an investment manager. Without being CF-30 registered, in other words, you can't do much at all.

Usually, people are deregistered when they change or lose their jobs. It might therefore be presumed that the six men have left Brevan Howard. But this isn't the case. Sebastien Guglietta, the senior scientist co-leading the AI trading group, who joined from Comac Capital in March 2014, is still there. So too is Duncan Larraz, who describes his job as 'applying computational intelligence to systematic strategies,' and who joined in May 2017 from Tages Capital. So too is Matthias Frank, a quant on the systematic trading team, Ez-Eldeen Hassan, a quant analyst, Stuart Broadfoot, a quantum entanglement specialist, and Sze LeeKit, whose role at BH is not entirely clear.

What's going on? Brevan Howard declined to comment, but something is up. Insiders suggest Guglietta and Larraz in particular have been working on business models using computational intelligence and have moved into something else. What that is is not entirely clear. But it's worth watching out for in future.