Fund Profile

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by BH Global. 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
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Overview

BH Global is a Global Macro hedge fund that aims to deliver strong risk-adjusted NAV returns in all market conditions. It invests in the range of trading strategies offered by Brevan Howard across multiple asset classes.

BH Global has a wider remit than its sister trust BH Macro, in being able to invest beyond developed-market interest rates and foreign exchange, and take more risk in a wider range of opportunities within markets including credit, equity and emerging markets.

One of the attractions of BH Global is its historic tendency to generate returns irrespective of the direction of bond or equity markets. As we discuss in the Portfolio section, this is largely down to Brevan Howard’s strategy of harnessing a variety of different traders who use options to create trades with asymmetric return profiles.

Whilst it is not specifically designed to do so, BH Global has often delivered strong returns when equity markets struggle. As we note in the Performance section, this has been particularly noteworthy since 1 February 2020, with NAV returns of 18% over the seven weeks to 21 April, relative to the MSCI ACWI in sterling of -11%, meaning outperformance of 29%.

Over the longer term (the ten years to 31 March 2020), BH Global has delivered compounded NAV returns for investors of 4.8% p.a. It has achieved this with annualised volatility of 6% and a maximum drawdown of 4.6%. BH Global’s NAV has exhibited low correlation to equities since IPO (an average of 0.13 on a rolling 12-month basis since IPO), and also to bonds (an average of -0.04).

Brevan Howard’s strong risk controls are built into the DNA of the organisation. Risk is controlled through strict risk limits at a trader and portfolio level. Looking at monthly data since inception, it is rare to see a month in which the NAV falls by more than 2%.

Analyst's View

In our view, the past few weeks have done nothing if not burnish BH Global’s credentials. Crucially, BH Global has low correlation to equities overall, and a tendency to be negatively correlated in times of stress. It is this pattern of returns that makes BH Global a potentially useful tool from a portfolio-construction perspective, and a candidate for more sophisticated investors to own when balancing their overall portfolios.

The very strong performance since the start of February, representing outperformance of equity markets of 29% at the time of writing, will once again focus investors’ minds on the unique investment properties that BH Global brings. However, whilst the NAV performance has been very strong, BH Global’s discount has sagged, and is now c 12% (meaning the share price is +9.4% since the start of February).

The share price return clearly represent a useful contribution to portfolio returns, but it is perhaps disappointing that the share price hasn’t fully reflected the strong NAV performance. As we discuss in the Discount section, the discount has rarely been wider in both absolute and relative terms (when compared to BH Macro).

Alongside the recent strong performance, recognition of BH Global as a diversifier in poor equity markets means it justifies a narrower discount than the current level. Indeed, we think the past few weeks illustrate that BH Global could be a good addition to investment portfolios, and the 12% discount is therefore anomalous.

bull bear
Recent solid performance in an uncertain macro environment, with low correlation to equities and bonds Positioning of fund can vary rapidly, and it is not easy for investors to get a timely understanding of current exposure
Discount to NAV is wide, both in absolute terms and relative to history Discount volatility: NAV moves are not always reflected by the share price
Multi-strategy nature of underlying fund means it can be used as a diversifier for equity portfolios Current illiquidity in market means spread (the difference between buying and selling prices) can be wide
Continue to Portfolio

Fund History

19 Nov 2020 Fund Analysis
BHGG continues to offer attractive diversification properties, particularly given elevated equity market valuations…
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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?
01 Jul 2020 Oh the humanity...
We consider two strategies to cope with markets which, boosted by massive government support, may be witnessing the start of a ‘melt-up’ which may be followed swiftly by a melt-down...
18 Jun 2020 Challenge the status quo
We explain why diversification on its own is not a panacea for portfolio construction...
29 Apr 2020 On solid ground
Our analysis of discounts highlights trusts which are likely to offer significantly less discount downside from the current level…
28 Apr 2020 Fund Analysis
Strong NAV performance in March crash means discount looks anomalous...
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…
30 Jan 2020 Is it time to run away?
With a sense of complacency in the air, our analysts debate the best ways to shore up your portfolio's defenses...
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...
16 Jan 2019 Fund Analysis
Seeks to generate strong risk adjusted returns in all market conditions
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