Fund Profile

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by BH Macro. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Overview
BHMG’s hefty 8% premium reflects its unique qualities…
Overview

BH Macro (BHMG) has had a transformative year. At the end of August 2021, it completed a merger with BH Global to form a single company with assets of c. £940m and a more diversified shareholder base. At a stroke, this increased assets by c. 70%, making it a much more liquid proposition for institutional investors.

BH Macro is a feeder into the Brevan Howard Master Fund, a macro hedge fund. The Master Fund aims to generate capital growth through a combination of global macro and relative value trading strategies. These strategies are devised and managed by the traders at Brevan Howard, and comprise predominantly global fixed income and foreign exchange trades. As we discuss in the Portfolio section, Brevan Howard’s traders try to exploit pricing anomalies within these markets, and to provide investors with asymmetric pay-off profiles over defined periods. These trades are typically leveraged (using margin), and might typically generate proportionately high returns if the trade works out, but should it not, then the maximum loss might be the cost of putting the trade on.

In this way, the Master Fund seeks to produce compelling asymmetric returns to its investors, independent of the market environment. As we show in the Performance section, BHMG has exhibited clear diversification from risk assets over its lifetime. It is during the years which have proved most difficult for equity markets that BHMG has historically performed strongest.

As a result of 2020 having seen the strongest performance in Brevan Howard’s history, the firm has been seeing a resurgence in investor interest, as well as having recruited a significant number of traders. Since the merger with BH Global completed, the shares have traded on an average premium to NAV of c.7%.

Kepler View

Brevan Howard as a business has undoubtedly seen a resurgence in investor appetite for its funds. We see it as an encouraging sign that Brevan Howard are adding to their team at the same time as their AuM is increasing. Over time, this should lead to a greater pool of high-performing talent. We also note a gentle shift in the culture towards a more institutional approach, and a desire to nurture and develop talent over time.

Brevan Howard indicates that recent hires have enabled greater exposure to liquid credit strategies, digital and quant strategies, all of which complement their existing areas. This should enable the team to continue to generate returns even though AuM has increased. The BH Master Fund is now soft-closed to new investment, so BHMG is the only way investors can access the strategy.

The historic annualised returns of 8.6% since strategy inception, with volatility of 6.1%, has been achieved over nearly two decades. However, perhaps of more relevance to the equity investor is that in the 20 worst performing months for equities over the Master Fund’s history, the Master Fund has delivered positive returns in 17 of them.

At the time of writing, the shares trade on a hefty premium to NAV of c. 8%. In our view, alongside the strong performance in absolute and relative terms, the premium reflects the market’s recognition of BHMG as a strong diversifier at times of equity market stress.

bull bear
Highly differentiated investment proposition, with few easily accessible comparable peers
Opaque underlying positioning
Diversifier to equities and bonds– strongest performance has historically come at periods of market stress
Can go through periods of relatively lacklustre returns
Larger size of company, following merger with BH Global, with better liquidity and less concentrated share register
Higher fees than traditional funds and trusts
Continue to Portfolio

Fund History

22 Jun 2022 Spider's web
We outline our new quantitative system for mapping the crucial performance characteristics of investment trusts…
11 Apr 2022 Results analysis: BH Macro
After an eventful 2021 for BH Macro, 2022 has so far proven to be strong in performance terms…
26 Jan 2022 Fight or flight...
Two of our analysts debate the impact that war in Ukraine could have on investors' portfolios...
18 Jan 2022 Fund Analysis
BHMG’s hefty 8% premium reflects its unique qualities…
01 Sep 2021 Winter is coming
Summer was a welcome opportunity for exhausted investors to turn their backs on the legion threats they face, but they haven't gone away and the days grow short - we examine four in detail...
28 Oct 2020 Can the passives bull market continue forever?
We examine what the trend to passive investing means for active investment strategies…
19 Aug 2020 Has the time come for Europe?
With mutual eurozone debt established all eyes are on the continent once more; but what will drive relative returns?
08 Apr 2020 Children of the Revolution
The outperformance of technology hints at an exciting possible future for the market when the virus is beaten…
10 Mar 2020 Crashing yields warn of systemic risk
With safe haven bonds reaching record low yields and the outlook hard to read, funds betting on volatility could benefit...
16 Jan 2019 There may be trouble ahead
We analyse why multi-asset macro funds have struggled and attempt to identify some possible closed-ended alternatives...
09 Jan 2019 Fund Analysis
A feeder trust for the Brevan Howard macro hedge fund, which has seen resurgent performance in 2018...
View all

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