Monthly Shareholder Report - March 2014

RNS Number : 3154F

BH Macro Limited

23 April 2014

 



		BH Macro Limited MONTHLY SHAREHOLDER REPORT: March 2014 CONFIDENTIAL DO NOT COPY OR DISTRIBUTE   Your attention is drawn to the disclaimer at the beginning and end of this document © Brevan Howard (2014). All Rights Reserved.
		Important Legal Information and Disclaimer BH Macro Limited ("BHM") is a feeder fund investing in Brevan Howard Master Fund Limited (the "Fund"). Brevan Howard Asset Management LLP ("BHAM") and Brevan Howard Capital Management LP (together with BHAM, "Brevan Howard") have supplied the information herein regarding BHM's and the Fund's performance and outlook. BHAM is authorised and regulated by the Financial Conduct Authority (the "FCA") in the United Kingdom. This material constitutes a financial promotion for the purposes of the Financial Services and Markets Act 2000 and the handbook of rules and guidance issued from time to time by the FCA (the "FCA Rules"). The material relating to BHM and the Fund included in this report has been prepared by Brevan Howard and is provided for information purposes only and does not constitute an invitation or offer to subscribe for or purchase shares in BHM or the Fund. This material is not intended to provide a sufficient basis on which to make an investment decision. Information and opinions presented in this material relating to BHM and the Fund have been obtained or derived from sources believed by Brevan Howard to be reliable, but Brevan Howard makes no representation as to their accuracy or completeness. Any estimates may be subject to error and significant fluctuation, especially during periods of high market volatility or disruption. Any estimates should be taken as indicative values only and no reliance should be placed on them. Estimated results, performance or achievements may materially differ from any actual results, performance or achievements. Except as required by applicable law, BHM, the Fund and Brevan Howard expressly disclaim any obligations to update or revise such estimates to reflect any change in expectations, new information, subsequent events or otherwise. All investments are subject to risk. Prospective investors are advised to seek expert legal, financial, tax and other professional advice before making any investment decisions. Tax treatment depends on the individual circumstances of each investor in BHM and may be subject to change in the future. Returns may increase or decrease as a result of currency fluctuations. You should note that, if you invest in BHM, your capital will be at risk and you may therefore lose some or all of any amount that you choose to invest. This material is not intended to constitute, and should not be construed as, investment advice.  Potential investors in BHM should seek their own independent financial advice.  BHAM neither provides investment advice to, nor receives and transmits orders from, investors in the funds to which this material relates nor does it carry on any other activities with or for such investors that constitute "MiFID or equivalent third country business" for the purposes of the FCA Rules. PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE RESULTS BMANL20140331

BH Macro Limited Manager: Brevan Howard Capital Management LP ("BHCM") Administrator: Northern Trust International Fund Administration Services (Guernsey) Limited ("Northern Trust") Corporate Broker: J.P. Morgan Securities Ltd. Listings: London Stock Exchange (Premium Listing) NASDAQ Dubai - USD Class (Secondary listing) Bermuda Stock Exchange (Secondary listing)	Overview BH Macro Limited ("BHM") is a closed-ended investment company, registered and incorporated in Guernsey on 17 January 2007 (Registration Number: 46235). BHM invests all of its assets (net of short-term working capital) in the ordinary shares of Brevan Howard Master Fund Limited (the "Fund"). BHM was admitted to the Official List of the UK Listing Authority and to trading on the Main Market of the London Stock Exchange on 14 March 2007. Total Assets $2,170 mm1 1. Estimated as at 31 March 2014 by BHM's administrator, Northern Trust.
Summary Information	BH Macro Limited NAV per Share (estimated as at 31 March 2014) Share Class NAV (USD mm) NAV per Share USD Shares 482.3 $20.00 EUR Shares 173.4 €20.13 GBP Shares 1,513.9 £20.74 BH Macro Limited NAV per Share % Monthly Change USD Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD 2007 0.10 0.90 0.15 2.29 2.56 3.11 5.92 0.03 2.96 0.75 20.27 2008 9.89 6.70 -2.79 -2.48 0.77 2.75 1.13 0.75 -3.13 2.76 3.75 -0.68 20.32 2009 5.06 2.78 1.17 0.13 3.14 -0.86 1.36 0.71 1.55 1.07 0.37 0.37 18.04 2010 -0.27 -1.50 0.04 1.45 0.32 1.38 -2.01 1.21 1.50 -0.33 -0.33 -0.49 0.91 2011 0.65 0.53 0.75 0.49 0.55 -0.58 2.19 6.18 0.40 -0.76 1.68 -0.47 12.04 2012 0.90 0.25 -0.40 -0.43 -1.77 -2.23 2.36 1.02 1.99 -0.36 0.92 1.66 3.86 2013 1.01 2.32 0.34 3.45 -0.10 -3.05 -0.83 -1.55 0.03 -0.55 1.35 0.40 2.70 2014 -1.36 -1.10 -0.46* -2.89* EUR Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD 2007 0.05 0.70 0.02 2.26 2.43 3.07 5.65 -0.08 2.85 0.69 18.95 2008 9.92 6.68 -2.62 -2.34 0.86 2.84 1.28 0.98 -3.30 2.79 3.91 -0.45 21.65 2009 5.38 2.67 1.32 0.14 3.12 -0.82 1.33 0.71 1.48 1.05 0.35 0.40 18.36 2010 -0.30 -1.52 0.03 1.48 0.37 1.39 -1.93 1.25 1.38 -0.35 -0.34 -0.46 0.93 2011 0.71 0.57 0.78 0.52 0.65 -0.49 2.31 6.29 0.42 -0.69 1.80 -0.54 12.84 2012 0.91 0.25 -0.39 -0.46 -1.89 -2.20 2.40 0.97 1.94 -0.38 0.90 1.63 3.63 2013 0.97 2.38 0.31 3.34 -0.10 -2.98 -0.82 -1.55 0.01 -0.53 1.34 0.37 2.62 2014 -1.40 -1.06 -0.50* -2.93* GBP Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD 2007 0.11 0.83 0.17 2.28 2.55 3.26 5.92 0.04 3.08 0.89 20.67 2008 10.18 6.86 -2.61 -2.33 0.95 2.91 1.33 1.21 -2.99 2.84 4.23 -0.67 23.25 2009 5.19 2.86 1.18 0.05 3.03 -0.90 1.36 0.66 1.55 1.02 0.40 0.40 18.00 2010 -0.23 -1.54 0.06 1.45 0.36 1.39 -1.96 1.23 1.42 -0.35 -0.30 -0.45 1.03 2011 0.66 0.52 0.78 0.51 0.59 -0.56 2.22 6.24 0.39 -0.73 1.71 -0.46 12.34 2012 0.90 0.27 -0.37 -0.41 -1.80 -2.19 2.38 1.01 1.95 -0.35 0.94 1.66 3.94 2013 1.03 2.43 0.40 3.42 -0.08 -2.95 -0.80 -1.51 0.06 -0.55 1.36 0.41 3.09 2014 -1.35 -1.10 -0.40* -2.83* Source: Fund NAV data is provided by the administrator of the Fund, International Fund Services (Ireland) Limited. BHM NAV and NAV per Share data is provided by BHM's administrator, Northern Trust. BHM NAV per Share % Monthly Change is calculated by Brevan Howard. BHM NAV data is unaudited and net of all investment management fees (2% annual management fee and 20% performance fee) and all other fees and expenses payable by BHM. In addition, the Fund is subject to an operational services fee of 50bps per annum. NAV performance is provided for information purposes only. Shares in BHM do not necessarily trade at a price equal to the prevailing NAV per Share. *Estimated as at 31 March 2014 PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS
ASC 820 Asset Valuation Categorisation*	Brevan Howard Master Fund Limited Unaudited Estimates as at 31 March 2014 % of Gross Market Value* Level 1 71.7 Level 2 27.9 Level 3 0.4 Source: Brevan Howard * These estimates are unaudited and have been calculated by Brevan Howard using the same methodology as that used in the most recent audited financial statements of the Fund. These estimates are subject to change. Level 1: This represents the level of assets in the portfolio which are priced using unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Level 2: This represents the level of assets in the portfolio which are priced using either (i) quoted prices that are identical or similar in markets that are not active or (ii) model-derived valuations for which all significant inputs are observable, either directly or indirectly in active markets. Level 3: This represents the level of assets in the portfolio which are priced or valued using inputs that are both significant to the fair value measurement and are not observable directly or indirectly in an active market.
Performance Review	During the month, the Fund suffered small losses in FX trading and to a lesser extent in USD interest rate trading and in equity macro trading. These losses were partially offset by small gains in interest rate volatility trading. Monthly, quarterly and annual contribution (%) to the performance of BHM USD Shares (net of fees and expenses) by strategy group Macro Rates FX EMG Equity Commodity Credit Systematic Total March -0.60 -0.02 -0.01 0.13 0.04 -0.02 0.04 -0.02 -0.46 Q1 2014 -3.18 -0.07 -0.03 -0.00 -0.06 0.02 0.49 -0.04 -2.89 YTD 2014 -3.18 -0.07 -0.03 -0.00 -0.06 0.02 0.49 -0.04 -2.89 Monthly, quarter-to-date and year-to-date figures are estimated by Brevan Howard as at 31 March 2014, based on total performance data for each period provided by the Fund's administrator, International Fund Services (Ireland) Limited. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS Methodology and Definition of Monthly Contribution to Performance: Attribution is approximate and has been derived by allocating each trader book in the Fund to a single category. In cases where a trader book has activity in more than one category, the most relevant category has been selected. The above strategies are categorised as follows: "Macro": multi-asset global markets, mainly directional (for the Fund, the majority of risk in this category is in rates) "Rates": developed interest rates markets "FX": global FX forwards and options "EMG": global emerging markets "Equity": global equity markets including indices and other derivatives "Commodity": liquid commodity futures and options "Credit": corporate and asset-backed indices, bonds and CDS "Systematic": rules-based futures trading
Market Review and Outlook	Market Commentary US The economy got back on track in March with payroll employment gaining nearly 200,000. The unemployment rate held steady at 6.7%, but the news was better underneath the surface as the labour force participation rate rose noticeably. The early hints about final demand in March pointed to a pick-up as well. In particular, auto sales surprised to the upside, returning to the pace last seen in early 2007. After a long and disruptive winter, it appears that the economy's momentum is improving going into the second quarter. Inflation remains stuck near 1%. Headline prices over the last year rose just 0.9% and core prices rose 1.1%. Inflation has been held down by a combination of deflation in goods prices, easing services prices, and a number of technical factors. So long as significant slack remains in the global supply chain, there is little reason to think core inflation will return to 2% any time soon. The Federal Reserve modified its forward guidance in March, dropping the nearly obsolete 6.5% unemployment rate threshold and adding that it currently anticipates that it will keep rates below normal even if full employment is achieved in 2016. In a puzzling development, the FOMC's forecasts were little changed and yet the median of their rate hike expectations drifted up. At the time of the meeting, the market interpreted this move as hawkish. However, the opposite reaction greeted the Minutes, which argued that markets should essentially ignore the higher rates path. If this experience is any guide, there will be more volatility to come. EMU The Eurozone unemployment rate has stabilised at a high level of 11.9%. This masks a further decline in unemployment in Germany and in Spain, but an increase in France and in Italy.  The Eurozone Composite PMI dipped to 53.1 in March from February's 32-month high of 53.3, likely indicating that the cyclical peak in growth could be near. There was some divergence in developments, as the PMI rebounded in France, while it fell in Germany and in Italy. Low inflation continues to be the main policy dilemma in the euro area. According to Eurostat's flash estimate, euro area HICP inflation dropped to 0.5% y/y in March. This is the lowest level of headline inflation in the euro area since November 2009. The decline in headline inflation was mainly due to a sharp deceleration in food prices and a drop in core inflation, both contributing to approximately half of the overall decline. The decline in core inflation was to a large extent due to the timing of the Easter holidays this year relative to last year. Despite the March inflation data having been a "genuine" downside surprise to the ECB, the central bank took no action in its policy meeting. However, it did indicate it may take further action in the future, if needed, also in the form of quantitative easing should inflation stay too low for too long. The next milestones for the ECB will be the April inflation print, when it will have to assess the extent of the calendar effect rebound, and the June policy meeting, when the new staff forecasts will be reported. UK The constant theme in the UK data is firm growth with weak inflation. Monthly business indicators over the past months have stabilised at high levels or eased back slightly, but have generally remained resilient. Consumer confidence has risen back to pre-crisis levels, retail sales growth has continued to be robust, as have car sales. Unemployment claims data point to ongoing improvement in the labour market, consistent with above-trend growth. While some moderation in growth in the next few quarters is likely, the data thus far have been resilient. The composition of growth is also becoming more balanced, which reduces the risk that it will fall back sharply. First, investment is making an increasing contribution to growth, and with investment intentions at cyclical highs this strength looks set to continue at least in the near term. Second, with inflation falling further below target but some increase in wage inflation due to a stronger labour market, real household incomes are set to rise. While consumption growth has slowed somewhat from its high pace in mid-2013, these real income developments are likely to put consumption growth on a sounder footing for 2014. External rebalancing remains a more distant prospect, as this relies on Eurozone demand improving by more than currently seems likely. Inflation remains benign and continues to surprise the Bank of England ("BoE") on the downside. Inflation is expected to remain below target for the remainder of the year. Wage inflation, on the other hand, shows some early signs of improving from its historical lows. As the year progresses, wage inflation is anticipated to normalise further. The BoE announced in February that there would be no further quantitative guidance once the 7% forward guidance unemployment threshold is reached, likely within the next few months. Instead, the BoE has announced its intention (but not commitment) not to hike in the near term, to hike only gradually once hikes start, and to a level well below historical estimates of the neutral rate. Japan Japan is working through two big spring events: the wage negotiations and the consumption tax increase.  Following unusual protracted political attention, major corporations announced their initial offers to raise base wages, in most cases for the first time in several years.  The initial offers from the likes of Toyota were not eye popping, although by the time negotiations wrap up they should set a backstop for inflation expectations and provide a partial offset to the consumption tax hike.  Sales taxes were hiked by 3 points to 8% on 1 April. Recent survey data suggest a moderate bump in activity in advance of the tax hike and fears of at least a temporary slowdown thereafter.  More respondents reported favourable conditions relative to unfavourable conditions in the first quarter than at any time since the early 1990s.  On the other hand, the diffusion index for future conditions fell back.  The Shoko-Chukin survey of small and medium enterprises dropped sharply for April after a spurt in March.  With the consumption tax hike more in view, household confidence dropped in February to a level below that seen before the Government announced its intentions to pull the country out of deflation. Price inflation continues apace, but prices have not evinced a further acceleration.  On a seasonally adjusted basis, core inflation (excluding fresh food prices) has averaged about 0.1% per month for a while now, and western core prices (excluding all food and energy prices) has been trending at about half that rate.  By all accounts the inflation impetus from the drop in the yen over early 2013 has played out.  Year-on-year rates continue to improve due to base effects, but those gains will not continue unless monthly rates pick-up.  Policymakers are banking on a shrinking output gap to propel inflation toward its 2% target.  There are scattered reports of labour shortages starting to push up wages, though this has yet to show through to the consumer price data. As with the economy, the market is in waiting mode with respect to structural reforms.  Watchers generally expect several reforms to be implemented, but there has been little progress to date.  Japan announced some changes to its Government-run pension fund such as allowing more investment strategies and hiring some different outside managers.  But, it is anticipated that there will also be a major reduction in the share of assets invested in JGBs and an increase in the share of assets invested into equities.  An expansion of tax-favoured investment accounts is also expected, which should also serve to boost domestic investment in equities, though the relevant laws have not been enacted.  Analysts expect the Prime Minister's office to propose legislation to cut the corporate tax rate, which is high by OECD standards, but that legislation is not expected to be proposed until later this year. China January and February data pointed to a significant deceleration of growth in the first quarter of 2014. Top leaders, including Premier Li, have made public statements on several occasions regarding the importance of protecting growth within a reasonable range. So far, the pro-growth measures announced were restricted to accelerating the existing infrastructure projects in the pipeline, as well as securing financing of priority projects. PPI remained in deflation and both the HSBC PMI and the official PMI pointed to a further slowdown in March. Note that the headline official PMI saw a slight improvement of 0.1, but was purely due to seasonality. Therefore, if seasonality is excluded, the March official PMI points to further weakening of the manufacturing sector. In the first two months of the year, retail sales growth slowed to 11.8%, partly due to the anti-corruption campaign, industrial production to 8.6% and Fixed Asset Investments to 17.9%. After a large front-loading of credit in January, total social financing eased in February. The largest drop is due to new loans, mostly explained by the slowed lending during the Chinese New Year. Trust loans and corporate bond issuance are still holding up well, suggesting that interest in those products have not been dampened much by the rising default risks. The trade balance turned into a deficit in February.
Enquiries	Northern Trust International Fund Administration Services (Guernsey) Limited Harry Rouillard [phone]

Risk Factors

Acquiring shares in BHM may expose an investor to a significant risk of losing all of the amount invested. Any person who is in any doubt about investing in BHM (and therefore the Fund) should consult an authorised person specialising in advising on such investments. Any person subscribing for shares in BHM must be able to bear the risks involved. These include, among others detailed in BHM's Prospectus, the following:

• The Fund is speculative and involves substantial risk.

• The Fund will be leveraged and will engage in speculative investment practices that may increase the risk of investment loss. The Fund may invest in illiquid securities.

• Past results of the Fund's investment managers are not necessarily indicative of future performance of the Fund, and the Fund's performance may be volatile.

• An investor could lose all or a substantial amount of his or her investment.

• The investment managers have total investment and trading authority over the Fund, and the Fund is dependent upon the services of the investment managers.

• Investments in the Fund are subject to restrictions on withdrawal or redemption and should be considered illiquid. There is no secondary market for investors' interests in the Fund and none is expected to develop.

• There are restrictions on transferring interests in the Fund.

• The investment managers' incentive compensation, fees and expenses may offset the Fund's trading and investment profits.

• The Fund is not required to provide periodic pricing or valuation information to investors with respect to individual investments.

• The Fund is not subject to the same regulatory requirements as mutual funds.

• A portion of the trades executed for the Fund may take place on foreign markets.

• The Fund is subject to conflicts of interest.

• The Fund is dependent on the services of certain key personnel, and, were certain or all of them to become unavailable, the Fund may prematurely terminate.

• The Fund's managers will receive performance-based compensation. Such compensation may give such managers an incentive to make riskier investments than they otherwise would.

• The Fund may make investments in securities of issuers in emerging markets. Investment in emerging markets involve particular risks, such as less strict market regulation, increased likelihood of severe inflation, unstable currencies, war, expropriation of property, limitations on foreign investments, increased market volatility, less favourable or unstable tax provisions, illiquid markets and social and political upheaval.

The above summary risk factors do not purport to be a complete description of the relevant risks of an investment in shares in BHM and therefore reference should be had to BHM's Prospectus and related offering documentation for a complete description of these and other relevant risks.

 

END

 

 

MSCKXLBLZZFXBBF