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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 (BHMG) is a listed hedge fund with net assets of c. £1.2bn, and is a feeder into Brevan Howard’s flagship Brevan Howard Master Fund Limited, (Master Fund). The Master Fund is invested across multiple Brevan Howard investment strategies. This makes BHMG’s shares the only access point for retail investors, not to mention the fact that being listed on the LSE it is also more liquid.

Capital is allocated across a wide range of traders, most of whom have exposure to developed bond and currency markets, although there is exposure elsewhere (see Portfolio section). In having no house view, traders are free to position their allocated capital however they wish, as long as they stay within strictly defined mandates and risk controls. Traders aim to construct strategies, often contingent in nature, with superior risk/return profiles, whose outcomes will often be crystallised by an expected event occurring within a pre-determined period of time. Traders use a wide range of instruments to construct trades, including options and futures. Allocations to traders and strategies are set by Brevan Howard’s investment committee.

The current premium to NAV at which BHMG’s shares currently trade, as can be seen in the Discount section, is in our view reflective of the strong diversification properties exhibited by the Master Fund, particularly since 2020. Whilst BHMG has delivered positive returns over this period, the strongest periods of performance since IPO have come at times of stress for equity and bond markets.

As well as returns, in our view one of the chief attractions of BHMG is the ability of the managers to control downside risk. Risk management is a key part of the investment process. BHMG’s maximum NAV drawdown since IPO of 11.3%, compares to the MSCI World’s maximum drawdown over the same period of 35% (Source: Morningstar).

Analyst's View

As discussed in the Portfolio section, the managers have shown so far that their investment process is repeatable, not built on an ability to forecast the future better than anyone else, but through a probabilistic interpretation of events compared to what the market is pricing currently. In our view, investors should consider an investment in BHMG, not for its specific exposures but for the team’s continued ability to dynamically construct asymmetric trades which offer the prospect of good risk-adjusted returns over time, along with the Master Fund’s strong historic diversification properties. Brevan Howard see their ‘edge’, or ability to continue to generate good risk-adjusted returns, resting on three pillars of expertise: macro thinking, trade structuring and risk management, none of which appears threatened by the firm’s success in raising assets over recent years.

Historically, the Master Fund has generated strong risk-adjusted returns and particularly at times of market stress, as discussed in the Performance section. Brevan Howard has been hiring trading talent as well as developing new initiatives under CEO Aron Landy, allowing it to broaden the markets and products it offers clients. Overall, BHMG’s shares offer strong diversification to traditional portfolios, which is likely the reason that BHMG’s shares have been trading at such a significant premium over latter years. As discussed in the Discount section, in our view this presents something of a risk for investors, given the potential for the shares to de-rate if NAV returns disappoint over any period.

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 merger with BH Global, with better liquidity and less concentrated share register

Bear

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

Fund History

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...
View all

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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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