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
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Overview

BH Macro Limited (LON:BHMG) is a listed investment company with net assets of c. £1.5bn and is a feeder into one of Brevan Howard’s flagship funds, Brevan Howard Master Fund Limited (Master Fund). The Master Fund is one of the most successful hedge funds of all time, in terms of the absolute amount of money returned to investors since the firm’s launch in 2002 (see Management section).

The Master Fund aims to provide compelling, asymmetric returns for investors, irrespective of market conditions. In order to achieve this, the Master Fund has exposure to a complementary combination of macro directional and macro relative value strategies, all overseen by a highly-resourced risk management team. Capital is allocated across a wide range of traders, aiming to diversify exposure across the best risk-adjusted opportunities, primarily within developed markets’ fixed income and FX markets.

Brevan Howard see their edge as resting on three pillars of expertise: macro thinking, trade structuring and risk management. Brevan Howard continue to expand their team, developing the quality and depth of their traders. According to the recently published annual results, this has included hires which expand the firm’s capabilities into new, related areas. This is designed to add complementary performance and diversified return streams, while allowing the manager to manage a greater pool of assets.

Over the long term, BHMG has delivered attractive returns, both on absolute and risk-adjusted bases (see Performance section). Since the trust’s IPO in 2007 to the end of December 2022, the sterling NAV total return has been 9.45% per annum, with a volatility of 8.14%. This gives the trust a Sharpe ratio of 1.03, according to Brevan Howard.

Analyst's View

As we discuss in the Portfolio section, Brevan Howard’s ability to deliver attractive, uncorrelated returns does not rest on their ability to forecast the future better than anyone else. Instead, it is their ability to evaluate and create asymmetric trades, alongside the strong diversification offered by the huge resources of their global trading team, not to mention Brevan Howard’s strong risk controls, that has led BHMG to achieve attractive absolute and relative returns since its IPO.

Time and time again, we observe that BHMG has delivered its best returns during periods of stress for equity or bond markets. 2022 was a banner year for the firm, coming at a time when equity and bond markets struggled. BHMG generated returns of 21.93% over the year, proving its worth as a portfolio diversifier. On the other hand, March 2023 was a tough month, with a fall in the sterling share class NAV of an estimated 4.33%. Whilst clearly disappointing, other macro hedge funds have seen even greater falls, and so we see March 2023 as an example where Brevan Howard’s risk controls have controlled downside risk in an extreme environment for macro traders. In our view, this is all part of the risks and rewards of hedge fund strategies and is to be expected. Encouragingly, demand for the shares appears to be supporting the share price premium, despite this short-term challenge. Brevan Howard observe that global imbalances, both within individual economies as well as between them, are at generational extremes. Consequently, the macro landscape looks set to remain extremely interesting.

Bull

  • Highly-differentiated investment proposition, with few easily accessible comparable peers
  • Diversifier to equities and bonds – strongest performance has, historically, come at periods of market stress
  • Larger size of company, following fundraising and share split, means better liquidity

Bear

  • Opaque underlying positioning
  • Can go through periods of relatively lacklustre returns
  • Higher fees than traditional funds and trusts
Continue to Portfolio

Fund History

08 Nov 2024 Monthly roundup: the budget’s impact, DGN's strategic review and our podcasts & results highlights
Jo and Ryan discuss the latest news, reviews and interviews in the investment trust world...
30 Oct 2024 Cream of the crop
We identify those trusts that use the distinctive features of investment trusts to the full…
14 Oct 2024 Listed hedge funds: teach-in on BH Macro
Explaining how investment trusts can offer access to hedge fund returns…
06 Nov 2024 BH Macro
William Heathcoat Amory
Rewatch our teach-in session from 6th November 2024...
Watch Recording
13 Oct 2024 Investing in hedge funds with investment companies
How investment trusts can provide access to the dynamic and diversifying asset class of hedge funds...
02 Oct 2024 Results analysis: BH Macro
BHMG reports its interim results...
12 Jun 2024 How do you like them apples?
We do our best to categorise the trusts in the Flexible sector, many of which share little common ground...
10 Apr 2024 Results analysis: BH Macro
BH Macro rebounds in H2 of 2023…
14 Feb 2024 Fund Analysis
BHMG’s differentiated proposition is made yet more attractive given the 11% discount to NAV…
01 Feb 2024 Bring some yin-yang into your portfolio in 2024
Inherent contradictions within portfolios can give them stability in a polarised world...
01 Nov 2023 Back to basics
Higher rates mean re-visiting portfolio construction...
05 Oct 2023 Fund Analysis
BHMG’s proposition as a high-quality diversifier remains, yet it trades on a 11% discount to NAV…
18 Sep 2023 Results analysis: BH Macro
After a banner year in 2022, 2023 has proved more challenging for BHMG and a wide discount has emerged…
02 May 2023 Fund Analysis
BHMG’s premium has moderated, yet it continues to offer strong diversification…
06 Apr 2023 Results analysis: BH Macro
2022 was a banner year, but a negative month in March 2023 means BHMG’s premium has subsided…
30 Nov 2022 Cry havoc!
Lessons from a year in which an already troubled world was savaged by the dogs of war...
19 Oct 2022 Gimme shelter
Our analysts examine safe havens and defensive strategies as we endure the market's 19th Nervous Breakdown...
21 Sep 2022 Results analysis: BH Macro
BHMG had a strong first half to its current financial year…
16 Sep 2022 Fund Analysis
BHMG continues to prove its worth in portfolios...
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...
19 Nov 2020 Fund Analysis
BHGG continues to offer attractive diversification properties, particularly given elevated equity market valuations…
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?
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
09 Jan 2019 Fund Analysis
A feeder trust for the Brevan Howard macro hedge fund, which has seen resurgent performance in 2018...
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The information contained herein is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States to or for the benefit of any United States person (being residents of the United States or partnerships or corporations organised under the laws thereof). The investment funds referred to herein have not been registered in the United States under the Investment Company Act of 1940 and units or shares of such funds are not registered in the United States under the Securities Act of 1933.
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