Monthly Shareholder Report - March 2015

RNS Number : 9279L

BH Macro Limited

30 April 2015

 



		BH MACRO LIMITED MONTHLY SHAREHOLDER REPORT: MARCH 2015 YOUR ATTENTION IS DRAWN TO THE DISCLAIMER AT THE END OF THIS DOCUMENT

BH Macro Limited	Overview
Manager: Brevan Howard Capital Management LP ("BHCM") Administrator: Northern Trust International Fund Administration Services (Guernsey) Limited ("Northern Trust") Corporate Broker: J.P. Morgan Cazenove Listings: London Stock Exchange (Premium Listing) NASDAQ Dubai - USD Class (Secondary listing) Bermuda Stock Exchange (Secondary listing)	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:	$1,714 mm¹
	1. As at 31 March 2015 by BHM's administrator, Northern Trust.
Summary Information	BH Macro Limited NAV per Share (as at 31 March 2015)
	Share Class NAV (USD mm) NAV per Share USD Shares 386.2 $21.22 EUR Shares 115.5 €21.37 GBP Shares 1,212.6 £22.05
	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 -0.40 -0.81 -0.08 -0.06 0.85 0.01 3.96 -1.73 1.00 -0.05 0.11 2015 3.14 -0.60 0.36 2.90
	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 -0.44 -0.75 -0.16 -0.09 0.74 0.18 3.88 -1.80 0.94 -0.04 -0.11 2015 3.34 -0.61 0.40 3.12
	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 -0.34 -0.91 -0.18 -0.09 0.82 0.04 4.29 -1.70 0.96 -0.04 0.26 2015 3.26 -0.58 0.38 3.06
	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 BHCM.  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. As at 31 March 2015 PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS
ASC 820 Asset Valuation Categorisation*	Brevan Howard Master Fund Limited
	Unaudited estimates as at 31 March 2015
	% of Gross Market Value* Level 1 59.1 Level 2 40.3 Level 3 0.6
	Source: BHCM * These estimates are unaudited and have been calculated by BHCM 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	The information in this section has been provided to BHM by BHCM During the month, the Fund made gains in FX macro trading and, to a lesser extent, in equity macro trading and interest rate volatility trading. Some losses were suffered in directional and curve interest rates 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 Discount Management Total March 0.06 0.31 0.02 -0.12 0.02 -0.00 0.09 0.00 0.00 0.36 Q1 2015 1.66 0.66 0.13 -0.04 0.03 -0.01 0.39 0.03 0.04 2.90 YTD 2015 1.66 0.66 0.13 -0.04 0.03 -0.01 0.39 0.03 0.04 2.90 Monthly, quarter-to-date and year-to-date figures are calculated by BHCM as at 31 March 2015, based on total performance data for each period provided by the Fund's administrator, International Fund Services (Ireland) Limited. Figures rounded to two decimal places. 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 "Discount Management": buyback activity for discount management purposes
Manager's Market Review and Outlook	The information in this section has been provided to BHM by BHCM
	US Growth slowed noticeably in the first quarter with retail sales, housing starts, and indicators of capital expenditures all disappointing in March. Most of the slowdown can be attributed to a combination of another unseasonably harsh winter and West Coast port disruptions. However, other fundamental factors are playing a role as well. Business outlays on structures and equipment related to drilling have fallen sharply with the price of oil and the large appreciation in the USD is probably restraining exports at least to some extent. Reinforcing concerns about the breadth of the slowdown, payroll employment undershot expectations in March. Volatility is a normal part of the labour market, especially when temporary factors may hold back hiring for a time. However, solid increases in employment in the spring are required in order to maintain a constructive overall view on the labour market. With job openings at near-record highs, unemployment rolls shrinking, and positive sentiment, the likelihood is the unemployment rate resumes its downward trend. Consumer energy prices have bounced around at the bottom of their recent range, lending some stability to headline inflation around zero. Core inflation has shown signs of stabilising at low rates. However, core inflation is anticipated to slip further under the influence of the pass-through of lower consumer energy prices, weak imported inflation, and restrained pipeline pressures. Core inflation is expected to bottom in the summer and then gently begin to rise as the price-level shocks work their way through the system and less slack and anchored inflation expectations exert a gravitational pull upward. The Fed took another step toward policy normalisation at their meeting in March. The Federal Open Market Committee statement dropped the forward guidance that the Fed would be "patient" in favour of a data-dependent standard of "reasonably confident" that inflation would move back to the mandate-consistent rate of 2% in the medium term. That is a relatively low hurdle for lift-off. However, that more hawkish message was more than offset by the Committee's re-assessment that there is more slack in the labour market, a lower expected path of tightening, and rate hikes that will likely be "gradual".  EMU The speed of the cyclical economic recovery in the euro area, albeit moderate, picked up in the first quarter as a result of several coinciding factors. From the sharp decline in oil prices, providing a strong boost to household disposable income, to the weaker currency, which has supported external trade amid a global demand slowdown more noticeable in emerging economies, to a financial impulse stemming from both lower bond yields and accelerating credit formation. While business and consumer confidence have recovered sharply (and relatively more in the periphery countries), and retail sales have bounced strongly, indications on the investments side remain mixed. The improvement in the credit impulse - which measures the acceleration of bank lending and is thus a measure comparable to GDP growth - still reflects partly accelerating legacy loan repayments rather than new lending.  That said, the simultaneous decline in bond yields and money market rates (which also contributed to a decline in bank lending rates), the depreciation of the euro exchange rate and the increase in stock prices have all contributed to easing financial conditions in the euro area, which are currently the easiest on record. Conditions have recently eased in all member states with the exception of Greece and relatively more so in the periphery than in the core. The start of the ECB's Public Sector Purchase Programme in March has had a larger than expected impact on the financial markets, considering that a lot had already been priced in before and right after the announcement on 22 January. Money market rates have declined recently, but this was also driven by the fact that banks did not return all of the 3Y LTRO money that expired in end-February as well as the surprisingly large allotment in the March TLTO tender (€100 bn allotted versus €40 bn expected). Concerns that the ECB might be facing a shortage of willing sellers contributed to a sharp decline in Government bond yields, pushing the short maturity segment into negative territory in all member states except Portugal, Spain and Italy. UK In the UK, recent growth indicators have started to stabilise or pick-up slightly after a decline from their peak last summer. However, hard data on activity continued to slow, and growth is set to disappoint official forecasts again in the first quarter. Our view remains that UK growth has transitioned from a strong pace in excess of 3% to a more moderate pace of 2-2.5%, but is not slowing any further. Activity in the housing market looks to be slowly picking up after declining for most of 2014, as there has been no additional macro-prudential tightening since May 2014 and market interest rates have come off a bit. Business investment growth is unlikely to accelerate from the solid pace in 2014, and is more likely to ease off a little. An appreciation of around 4% in the trade-weighted exchange rate since the start of the year is anticipated to be a headwind, as will the uncertainty amid the general election. Fiscal policy is likely to turn more contractionary again, after austerity has been more or less paused in the past two years. The medium-term fiscal path will depend greatly on the outcome of the general election, which remains highly uncertain, with both main parties neck and neck in the polls and neither likely to secure an outright majority. The most likely result is a minority Government with ad hoc support from smaller parties, which is an extremely unusual situation in UK politics. Wage inflation has faltered again after some tentative signs of improvement late last year. Strong actual and potential labour supply increases from immigration, increased participation of younger workers and longer participation of older workers are likely to keep wage growth low relative to the pre-crisis period. These forces are fundamentally changing the relationship between the unemployment rate, which is only half a point away from its pre-crisis level, and wage inflation. Inflation is expected to be much weaker than in 2014. Lower oil prices play a big role of course, but core inflation is subdued too, and the momentum in core inflation is still downward. Against a background of decent but not booming growth, combined with weak inflationary pressure, there is no urgency for the Bank of England to hike rates. In the coming months, the BoE is more likely to become concerned about the persistent weakness of underlying inflationary pressures than about any risk of overheating. Japan Although the Bank of Japan remains confident in its expectations of an acceleration in prices, the latest data are not supportive. Core prices slipped in February on a seasonally adjusted basis, dragged down by energy prices.  Excluding food and energy, prices edged up in February but have been largely unchanged on balance since the summer.   Inflation will have to pick-up noticeably if it is going to come close to the BoJ FY 2015 projection.  Reports on wage negotiations suggest a somewhat faster increase this year than last year, though it remains to be seen whether they are sufficient to generate the requisite acceleration in prices. Consumer inflation expectations eased somewhat in the latest report, and the Tankan diffusion index of output prices was somewhat disappointing. Activity data were also mixed on the month. The Tankan survey picked up, and the economy watchers' survey continued its post-tax hike recovery.  On the other hand, the Shoko-Chukin Bank survey of small and medium sized enterprises gave back some of the previous month's gain, and industrial production unwound most of its January gain. However the most important development on structural reform comes from Washington.  Reports suggest that US committee leaders of the two parties are readying legislation to authorise trade promotion authority. The so-called fast-track legislation prevents amendments to U.S. negotiated trade treaties.  Although by no means guaranteeing a successful end to the Trans-Pacific Partnership talks, it is a difficult, necessary hurdle to cross. China Activity in China has not yet shown any signs of a turnaround in March. The PMIs produced by both Markit (HSBC) and the National Bureau of Statistics were mixed, and the synthetic HSBC Composite PMI stayed put 51.8. However, details of the surveys were more discouraging than the headlines, especially as far as the inventory cycle is concerned. Moreover, and most importantly, disinflationary pressures remain intense. Real activity indicators including industrial production, fixed-asset investment, and retail sales in March disappointed against the market's expectation. In particular, industrial production growth slowed to 6.4%, the lowest level since the 2008 financial crisis. Consequently, sequential growth (saar) in the first quarter was 5.3%, well below this year's target of 7%. CPI yearly inflation stayed at 1.4% y/y in March, slightly above the 1.3% y/y consensus mostly due to temporary factors, while PPI remained firmly in negative territory, at -4.6% y/y, thus providing room for further policy easing. According to trade data in March, the trade surplus narrowed sharply from US$60bn in February to only US$3bn. That said, it was mostly driven by a late China New Year effect and thus trade surplus is expected to recover in April. However details of the report were not encouraging, as imports have continued to fall in both value and quantity terms. The most notable policy development is the rapidly falling 7-day repo rate fixing: nearly 200 bps in the past month. Two likely motivations are behind this move: (i) the desire to accelerate the pace of monetary easing in order to achieve the growth target amid the disappointing economic data at the beginning of the year; and (ii) the accelerated interest rate liberalisation. Indeed, the US has clearly stated that it expects further interest rate and capital account liberalisation as pre-conditions for China's yuan to join the IMF's SDR currency basket.
Enquiries	Northern Trust International Fund Administration Services (Guernsey) Limited Harry Rouillard [phone]

Important Legal Information and Disclaimer

BH Macro Limited ("BHM") is a feeder fund investing in Brevan Howard Master Fund Limited (the "Fund").  Brevan Howard Capital Management LP ("BHCM") has supplied certain information herein regarding BHM's and the Fund's performance and outlook.

The material relating to BHM and the Fund included in this report is provided for information purposes only, does not constitute an invitation or offer to subscribe for or purchase shares in BHM or the Fund and is not intended to constitute "marketing" of either BHM or the Fund as such term is understood for the purposes of the Alternative Investment Fund Managers Directive as it has been implemented in states of the European Economic Area. 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 to be reliable, but none of BHM, the Fund or BHCM make any 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 BHCM expressly disclaim any obligations to update or revise such estimates to reflect any change in expectations, new information, subsequent events or otherwise.

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.  All investments are subject to risk. You are advised to seek expert legal, financial, tax and other professional advice before making any investment decisions.

THE VALUE OF INVESTMENTS CAN GO DOWN AS WELL AS UP.  YOU MAY NOT GET BACK THE AMOUNT ORIGINALLY INVESTED AND YOU MAY LOSE ALL OF YOUR INVESTMENT.  PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE RESULTS.

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 gaining exposure to the Fund) should consult an authorised person specialising in advising on such investments. Any person acquiring shares in BHM must be able to bear the risks involved. These include 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 Fund's 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.

• 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 and its investment managers are 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 of BHM or the Fund and therefore reference should be made to publicly available documents and information.

 

END

 

 

PFUEBLFXEZFEBBK