BH Macro (BHMG)

Brevan Howard (BH) has consistently applied the same philosophy towards generating returns since the Master Fund was launched in 2003. BH Macro (BHMG), which IPO’d in 2007, is a listed feeder fund into the Master Fund, and represents a highly liquid access point to BH, one of the top hedge fund managers of all time (according to LCH Investments). BH aims to provide compelling, asymmetric returns for its clients, irrespective of market conditions.

As we discuss in the Portfolio section, BH’s traders take a very different approach to investing capital when compared to traditional managers of equity and bond funds. Their process does not rely on correctly anticipating the future path of equity or bond markets. Instead, traders tend to evaluate outcomes, say on the future path of interest rates, and then compare them with what the market is currently pricing in. Where the potential for a move is perceived by BH traders as under- or over-priced by the market, BH’s traders will seek to construct trades which have an attractive payoff if they are right, but minimise losses if they are not. BH describe this characteristic of trades, and of the Master Fund portfolio as a whole, as having convexity.

Aside from structuring convex trades, BH also seeks to minimise risks by proactively diversifying exposures. The Master Fund is made up of diversified capital allocations across BH’s trading teams, and performance is not dependent on any one trader, market view, asset class, or trading style. All investment activity is overseen by a highly resourced risk management team of 30 people, who work closely with the PMs. The risk team monitor the individual portfolio managers’ mandates as well as the overall risk being expressed within the fund. In fact, BH sees risk management as one of the three key pillars of its business, and it is what has contributed to the asymmetry of returns that we discuss in the Performance section.