Monthly Shareholder Report

RNS Number : 3887R

BH Macro Limited

20 August 2010

 



		Bh Macro limited   MONTHLY SHAREHOLDER REPORT JULY 2010 ADV02239 CONFIDENTIAL DO NOT COPY OR DISTRIBUTE Your attention is drawn to the disclaimer at the beginning and end of this document © Brevan Howard Asset Management LLP (2010). All Rights Reserved.
		Important Legal Information and Disclaimer BH Macro Limited (the "Fund"), is a feeder fund investing in the Brevan Howard Master Fund Limited ("BHMF"). Brevan Howard Asset Management LLP ("BHAM") has supplied the information herein regarding BHMF's performance and outlook. BHAM is authorised and regulated by the Financial Services Authority. This material constitutes a financial promotion for the purposes of the Financial Services and Markets Act 2000 (the "Act") and the handbook of rules and guidance issued from time to time by the FSA (the "FSA Rules"). The material relating to the Fund and BHMF included in this report has been prepared by BHAM and is provided for information purposes only and does not constitute an invitation or offer to subscribe for or purchase shares in 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 the Fund and BHMF have been obtained or derived from sources believed by BHAM to be reliable, but BHAM makes no representation as to their accuracy or completeness. Estimated results, performance or achievements may materially differ from any actual results, performance or achievements. Except as required by applicable law, the Fund and BHAM 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 the Fund and may be subject to change in future. Returns may increase or decrease as a result of currency fluctuations. You should note that, if you invest in the Fund, 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 the Fund should seek their own independent financial advice. BHAM neither provides investment advice to, nor receives and transmits orders from, investors in the Fund 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 FSA Rules. PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE RESULTS

Summary information	BH Macro Limited NAVs per share (estimated as at 30 July 2010) Shares Class NAV (USD mm) NAV per Share USD Shares 602.2 $16.96 EUR Shares 347.2 €17.02 GBP Shares 853.2 1745p BH Macro Limited NAV per Share % Monthly Change USD Shares 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 -2.07* -0.70* EUR Shares 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 -1.99* -0.60* GBP Shares 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 6.85 -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 -2.02* -0.57* Source: Underlying BHMF NAV data is provided by the Administrator of BHMF, International Fund Services (Ireland) Limited. BH Macro Limited NAV and NAV per Share data is provided by the Fund's Administrator, Northern Trust International Fund Administration Services (Guernsey) Limited. BH Macro Limited NAV per Share % Monthly Change are calculated by BHAM. BH Macro Limited 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 BH Macro Limited.  In addition, BHMF is subject to an operational services fee of 50bps per annum. NAV performance is provided for information purposes only. Shares in BH Macro Limited do not necessarily trade at a price equal to the prevailing NAV per Share. * Estimated as at 30 July 2010 PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS
FAS 157 Asset Valuation Categorisation*	Brevan Howard Master Fund Limited ("BHMF") Unaudited Estimates as at 30 July 2010 % of NAV (Gross Market Value) Level 1 59 Level 2 41 Level 3 0 Source: BHAM	* These estimates are unaudited and have been calculated by BHAM using the same methodology as that used for the 2009 audited financial statements of BHMF. 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, BHMF incurred losses in FX and interest rate spreads strategies, in particular, LIBOR and overnight rate spreads. Monthly contribution (%) to performance of BH Macro Limited USD Shares by asset class Total Macro Rates FX EMG Equity Commodity Credit Systematic July 2010 -2.07 -1.14 -0.59 -0.46 0.22 -0.04 0.04 -0.07 -0.03 Source: BHAM Methodology and definition of Monthly Contribution to Performance: Attribution is approximate and has been derived by allocating each trader book in BHMF 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 asset classes are categorised as follows: "Macro": multi-asset global markets, mainly directional (for BHMF, 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 In July, the data flow continued to disappoint and the majority of analysts marked down their forecasts to resemble the subdued outlook that we have anticipated. Nevertheless, in what has been a roller-coaster year, investor sentiment brightened and risk assets enjoyed another rally, bolstered by the sturdy data out of Europe and Asia, relief in the interbank funding market and the shelving of the Fed's exit strategy. Indeed, most of the key developments during the month were policy related. The European bank stress test results revealed manageable problems and the Fed began the process of evaluating options for further policy accommodation if growth were to deteriorate significantly. These policy responses enabled the market to stage a comeback. With interest rates set to be, in our view, "lower for even longer," fixed income markets enjoyed another strong rally. In the wake of the annual revisions to the national income and product accounts and the incoming data, we have adjusted our thinking about consumption spending. On the one hand, downward revisions showed that spending rose at a rate of less than 2% since the end of the recession, a path confirmed by the latest disappointing retail sales releases. On the other hand, the saving rate was revised up significantly. With the savings rate now reported to be above 6%, consumption should be less encumbered by the need to rebuild savings going forward. There have been pockets of strength in the recent data announced. Business expenditures on equipment and software rose at an annual rate of more than 20% in the last quarter. Orders for capital equipment remain sturdy pointing to further gains ahead. However, firms are making layoffs at a rate of more than 450,000 workers each week and are still cautious about adding to payrolls. Given the reluctance to hire and the restrained wages, we remain confident that the economy will expand at a slow rate in the second half of the year. EMU In the first half of the year, activity in the EMU largely benefited from the combined effects of the government stimulus, the inventory rebound and the weakening of the euro, which contributed to a sharp acceleration of activity into the summer. Moving into the second half of the year, the contribution of those factors to growth will begin to fade. The debt overhang in certain EMU countries, the needed fiscal consolidation and the still impaired banking sector will continue to be headwinds for the economy. The recent publication of the EU bank stress test results provided relief to the market, despite some scepticism of the reliability and questions over whether the tests were tough enough. The real test for the EMU banking sector will arrive in the coming months when there is the large funding roll-over. The interconnection between the liquidity needs of certain EMU countries and certain segments of the banking system will remain a critical issue.   Activity was exceptionally strong in Q2 as transitory factors such as cold weather,   which negatively affected actual data in Q1 unwound. Moreover, confidence rose in July as the functioning of the bond market found some normalisation and the substantial policy response put in place since May 2010 by both EU and national bodies appears to have calmed investor concerns of a sovereign default. Business surveys have shown a strong improvement in Germany, in particular, as its economy is benefiting more than others from a weak euro, lower interest rates and expansionary fiscal conditions. Consequently, the divergence between the economic performance of Germany and the weakest EMU economies is widening to unforeseen levels. Meanwhile, inflation pressures in the EMU remain subdued. The European Central Bank has become increasingly constructive on the EMU outlook, providing support to its strategy of a normalisation of liquidity conditions. UK In July, there was further evidence of slowing growth momentum in the UK. Activity surveys generally eased and expectations about future activity as well as consumer confidence fell sharply. Credit remains stagnant, as the small net positive extension of household credit is offset by a net reduction of bank credit to the corporate sector. In summary, these indicators suggest that a recovery is still underway, but at a sluggish rate only slightly above the trend. The fact that the UK economy is losing some momentum at the same time as the global economy indicates that the prospect for an investment and export driven recovery is unlikely. The more rapid pace of growth witnessed in Q2 appears to be an outlier. Inflation remains stubbornly above the target, and given the VAT hike in January 2011, it is likely to exceed the target until the end of 2011. However, the subdued money and wage growth suggest that the economy is not experiencing a more broad-based rise in inflationary pressure. Nevertheless, a prolonged period of above-target inflation means that inflation expectations are most likely to be less solidly anchored than at any time since the Bank of England ("BoE") independence. The BoE is trying to balance the fragile recovery and prospective fiscal tightening, which justifies the current highly stimulative monetary stance, with the upside risks to inflation expectations. This policy dilemma is unlikely to be resolved any time soon and in fact, will probably intensify around the turn of the year. Japan In July, indicators continued to signal an on-going softening of the recovery phase. The PMI survey showed a further fall for both manufacturing and services, as the moderation affects both the domestic and more export-oriented sectors of the economy. When combined together, estimates of the Composite PMI encompassing both sectors of the economy still point at a positive expansion rate. However, as suggested by the disappointing Q2 GDP release, the pace of the expansion is slowing from the early stages of this cycle. The stubbornly elevated level of the yen does not help the Japanese economy, either to fill the still ample output gap, which was opened by the steep recession of 2008-2009, or to stem deflationary pressures. Looking ahead, the soft landing phase in China, as well as the probable weakening of US and European imports, is likely to continue to weigh on the Japanese economy for the rest of this year. China Both the official and HSBC manufacturing PMI weakened in July, with the latter falling further below the 50 threshold. The breakdown of orders suggests that the current slowdown is mainly due to weaker domestic demand under tighter economic policies. There are also some positive signs in economic activity, which signal that a hard landing is not on the cards for the time being. Property sales volume recovered from the June 2010 bottom and the price of steel rebounded rapidly in the last two weeks of July. This information suggests that the GDP growth which is likely to be experienced in the second half of the year is the soft landing that authorities are looking for. Food inflation intensified this month due to pork and vegetable price rises, pushing the July headline CPI to new highs this year. The authorities have shown, thus far, no intention to ease policy conditions. Tightening measures in the property sector will continue to be implemented and the People's Bank of China has reiterated its ¥7.5 trillion yearly credit target.
Enquiries	Northern Trust International Fund Administration Services (Guernsey) Limited Harry Rouillard [phone]

Important Legal Information and Disclaimer

This material has been prepared by Brevan Howard Asset Management LLP ("BHAM"). BHAM is authorised and regulated by the Financial Services Authority of the United Kingdom (the "FSA"). BHAM may provide you with further data or material but makes no representation that such further data or material will be calculated or produced on the same basis, or in the same format, as this material. BHAM has used reasonable skill and care in the preparation of this material from sources BHAM believes to be reliable but BHAM and its affiliates give no warranties, representations or undertakings, express or implied, as to the accuracy or completeness of this information, and BHAM and its affiliates accept no liability for the accuracy or completeness of any such information. This material has been provided specifically for the use of the intended recipient only and must be treated as proprietary and confidential.  It may not be passed on, nor reproduced in any form, in whole or in part, under any circumstances without express written consent from BHAM. 

This material is provided for information purposes only and does not constitute an invitation or offer to subscribe for or purchase any of the products or services mentioned nor is it intended to constitute, or be construed as, investment advice. Any such offer may only be made by means of delivery of the relevant approved prospectus or offering memorandum (the "Prospectus").  The Prospectus must be received and reviewed prior to any investment decision. The material provided is not intended to provide a sufficient basis on which to make an investment decision. Potential investors in any products referred to in this material or to which this material relates (each a "Fund" and, collectively, the "Funds") should seek their own independent financial, legal and taxation advice.  Interests in the Funds have not been and will not be registered under any securities laws of the United States of America or any of its territories or possessions or areas subject to its jurisdiction, and may not be offered for sale or sold to nationals or residents thereof except pursuant to an exemption from the registration requirements of the U.S. Securities Act of 1933, as amended (the "Securities Act"), and any applicable state laws.

The Funds are only available to persons to whom such products may lawfully be promoted in any jurisdiction. In the United Kingdom, this material is directed only at, and made available only to, professional clients and eligible counterparties (as defined in the FSA's Handbook of Rules and Guidance (the "FSA Rules")).  This material is only provided to United States persons that are "accredited investors" as defined in Regulation D under the Securities Act and "qualified purchasers" as defined in the U.S. Investment Company Act of 1940, as amended (the "Company Act"), and the rules promulgated thereunder. Any Funds and services described in this material are only available to such persons and the information herein should not be relied or acted on by any other person.  This material is not intended for use by, or directed at, retail customers (as defined in the FSA Rules). BHAM neither provides investment advice to, nor receives and transmits orders from, investors in any Funds 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 FSA Rules. 

An investment in the Funds is speculative and involves a high degree of risk, which each investor must carefully consider.  BHAM and its affiliates give no representations, warranties or undertakings that any indicative performance or return will be achieved in the future or that the investment objectives and policies from time to time of the Funds will be met.  Past results are not indicative of future results. The value of investments and the income therefrom can go down as well as up, and an investor could lose all or a substantial amount of his or her investment.  While the Funds are subject to market risks common to other types of investments, including market volatility, the Funds employ certain trading techniques, such as the use of leverage and other speculative investment practices that may increase the risk of investment loss.  The Funds' managers will receive performance-based compensation.  Such compensation may give such managers an incentive to make riskier investments than they otherwise would.  The Funds' managers are subject to other conflicts of interest described in the applicable Prospectus.  Investments in the Funds are subject to periodic liquidity, which may be suspended under certain conditions, as well as restrictions on transfer.  There is no secondary market for interests in the Funds, and none is expected to develop.  Therefore, any person subscribing for an investment must be able to bear the risks involved and must meet the suitability requirements set forth in the relevant Fund's Prospectus.  Some or all alternative investment programs may not be suitable for certain investors.  Returns generated from an investment in a Fund may not adequately compensate investors for the business and financial risks assumed. 

Other risks associated with the Fund's investments include, but are not limited to, the fact that the Funds: can be highly illiquid; are not required to provide periodic pricing or valuation information to investors; may involve complex tax structures and delays in distributing important tax information; are not subject to the same regulatory requirements as investment funds registered under the Company Act; often charge higher fees and the high fees may offset the fund's trading profits; may have a no operating history or a limited operating history; can have performance that is volatile; invest in instruments that have been subject to periods of excessive volatility in the past, and such periods can be expected to recur; may have a fund manager who has total trading authority over the fund and the use of a single adviser applying generally similar trading programs could mean a lack of diversification, and consequentially, higher risk; and may effect a substantial portion of its trades on non-US exchanges. 

The text and statistical data or any portion thereof contained in this presentation may not be permanently stored in a computer, published, rewritten for broadcast or publication or redistributed in any medium, except with the express written permission of BHAM. BHAM will not be liable for any inaccuracies, errors or omissions in the material or in the transmission or delivery of all or any part thereof or for any damage arising from any of the foregoing.  References to indices are included to show the general trends in the relevant markets, and are not intended to imply that the Funds were comparable to these indices in either composition or risk.

Brevan Howard US LLC, a Delaware limited liability company (the "Placement Agent") acts as non-exclusive placement agent with respect to the sale of the Interests to certain investors in the Funds, and may provide such investors with marketing and other materials on behalf of Brevan Howard and the Funds.  The Placement Agent is registered as a broker-dealer under the U.S. Securities Exchange Act of 1934, as amended, and under various States' securities laws, and is a member of the Financial Industry Regulatory Authority, Inc.  The Placement Agent is not an affiliate of BHAM.

 

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