Monthly Shareholder Report - April 2011
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BH MACRO LIMITED Monthly Shareholder Report April 2011 ADV02663 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 (2011). All Rights Reserved. |
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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") has supplied the information herein regarding the Fund'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 BHM 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 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 the Fund and BHM 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, BHM 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 BHM 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 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. 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 |
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OverviewSummary Information |
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. BH Macro Limited NAV per share (estimated as at 28 April 2011)
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USD Shares
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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 |
0.48* |
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|
|
|
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2.44* |
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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 |
-1.93 |
1.25 |
1.38 |
-0.35 |
-0.34 |
-0.46 |
0.93 |
|
2011 |
0.71 |
0.57 |
0.78 |
0.51* |
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|
|
|
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|
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2.60* |
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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 |
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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 |
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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 |
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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 |
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2011 |
0.66 |
0.52 |
0.78 |
0.50* |
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|
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2.48* |
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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 International Fund Administration Services (Guernsey) Limited. BHM NAV per Share % Monthly Change is calculated by BHAM. 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 28 April 2011.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS
ASC 820 Asset Valuation Categorisation*
Brevan Howard Master Fund Limited
Unaudited Estimates as at 28 April 2011
|
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% of Gross Market Value |
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Level 1 |
59 |
|
Level 2 |
41 |
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Level 3 |
0 |
Source: BHAM
* These estimates are unaudited and have been calculated by BHAM 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 made profits in USD interest rates, FX, commodity and credit trading. Some losses were experienced in EUR interest rates and basis swaps trading.
Monthly contribution (%) to basic performance of BHM USD Shares by strategy group
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Total |
Macro |
Rates |
FX |
EMG |
Equity |
Commodity |
Credit |
Systematic |
|
April 2011 * |
0.48 |
-0.48 |
0.22 |
0.12 |
0.15 |
-0.09 |
0.21 |
0.24 |
0.10 |
Source: BHAM
* Estimated as at 28 April 2011.
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
Since February, incoming data have confirmed the softer outlook we have been highlighting in our monthly shareholder reports. First-quarter growth is tracking a little less than 2% annualised. In the current quarter, we are expecting a bounceback, but only to moderately above-trend growth. Consumption spending is well-maintained, but brisk business outlays on equipment and software are required to compensate for the weakness in the housing market and spending cuts in state and local government. Hopes for 4% growth this year have been well and truly dashed. The labour market is the brightest spot in the macro picture after a few months of strong job gains and a sizeable drop in the unemployment rate. However, initial claims for unemployment insurance started to rise at the beginning of the current quarter and the unemployment rate appears to have stalled at around 9%.
Concerns over inflation still linger, but if commodity prices moderate with the growth outlook then headline inflation is likely to peak and begin to recede in the third quarter. With limited pass-through, core inflation is likely to peak a little below the Federal Reserve's ("Fed") target of 2%. Inflation expectations have been generally well-anchored, with market breakeven inflation rates edging down lately.
The much-anticipated Federal Open Market Committee meeting in April proved to be a non-event. The course is "steady as she goes" for interest rates in the US, with no plans to shrink the balance sheet or change the "extended period" language anytime soon. The press conference by Fed Chairman, Ben Bernanke, calmed market fears that the Fed was planning to embark on a path of interest rate hikes.
EMU
A worsening growth-inflation trade-off is emerging in the EMU. Data released over the last month confirmed that the business cycle of the region has reached a more mature stage and leading indicators have started to turn. The cyclical inversion is being aided by the steep appreciation of the euro, which has risen by approximately 4% in effective terms since the beginning of 2011. At the same time, the outlook for inflation remains a concern. Production prices continue to accelerate and inflation expectations of households are close to levels last seen during the "inflation scare" of 2008. Breakeven inflation on long-term horizons measured over inflation-linked securities has risen, but it is still well below the levels seen in 2008. The combination of a deteriorating inflation outlook and future wage negotiation rounds in Germany is a source of concern for the European Central Bank ("ECB").
Given the upside risks to the inflation outlook, the ECB began its hiking cycle in early April, increasing rates to 1.25%. At the meeting in May, the ECB kept rates unchanged and signalled the intention to remain on hold for the next month. The sovereign debt crisis remains a concern. A bailout package for Portugal has been approved by Ecofin, but its implementation will be challenging. For Greece, both the June review by the EU/IMF and the funding gap for 2012 are keeping the financial markets nervous. Furthermore, the discussions on the future of EU governance, the enhancement of the European Financial Stability Facility, and the renegotiation of the Irish bailout package are far from over.
UK
The broad outlook remains one of subdued, below-trend growth and persistently high inflation. The household sector continues to be the most vulnerable part of the economy as negative real income growth, stagnating house prices and high unemployment generate fierce headwinds. Fiscal austerity measures are causing government spending to detract from growth. Exports and business investment are the only drivers of the recovery. The most negative data development over recent months has been worryingly weak readings for consumer confidence, but most other data (including activity surveys, high frequency activity data, labour surveys, housing, and car sales) suggest that underlying growth is slowing, but still positive.
Meanwhile, the outlook continues to signal persistently high inflation (above 4%) for the rest of this year, underpinned by the VAT hike, but also as a result of the continued pass-through from a weaker Sterling and higher commodity prices. After a period during which both inflation expectations surveys and pay settlements were picking up late last year and early this year, the past few months have seen some stabilisation in both. Inflation expectations surveys have stabilised at high levels, while pay settlements have stabilised at levels that are historically low. This should provide some comfort to the Monetary Policy Committee as unobserved longer-term inflation expectations remain anchored, despite inflation having been mostly above target for the past four years. While the near-term pressure for the Bank of England to hike rates has abated, persistently high inflation will continue to create a difficult environment for policymakers in which central bank credibility is likely to be stretched significantly.
Japan
In March, actual indications of economic activity undershot already downbeat expectations, as the disruption induced by both the natural disasters and the nuclear events have had a devastating impact on the economy. In particular, industrial production showed an unprecedented 15% month-on-month drop, while retail sales and consumer spending also contracted severely. In April, business surveys showed a further fall, which compounds the collapse recorded in March and suggests that a rebound is still unlikely in the near-term. PMI composite orders, which capture demand stemming from both the manufacturing and the services sector, fell in April from 41.3 to 36.0, the lowest level since March 2009. Looking ahead, we would expect to see the first signs of activity returning to some kind of normality and the reconstruction effort to start to kick in. However, the renewed appreciation of the Japanese yen over the last few weeks reduces some of the support to the recovery in activity.
China
The China composite PMI produced by Markit and disseminated by HSBC, which encompasses both manufacturing and services, remained almost unchanged in April, at around the same levels recorded in the previous two months. This signals a moderation of growth in the second quarter. CPI inflation hit a new high of 5.4% year-on-year in March, and declined slightly in April thanks to the sharp decline in vegetable prices. It appears likely that inflation will peak in the third quarter. In general, inflation is unlikely to get out of control this year provided the policy tightening has the desired effect to slow growth.
Policy-wise, the People's Bank of China ("PBOC") raised the one-year benchmark deposit and lending rate by 25bps, to 3.25% and 6.31% respectively, effective on 6 April 2011. The PBOC also raised the Reserve Requirement Ratio ("RRR") by 50bps, effective on 21 April 2011. Following this hike, the RRR is at 20.5% for big banks and 18.5% for small banks. The PBOC mentioned in the first quarter monetary policy report that both the current pace of economic growth (GDP expanded in the first quarter by 8.7% quarter-on-quarter and 9.7% year-on-year) and the employment situation (urban unemployment rate is 4.1%) are appropriate. However, the main objective of the policy tightening is stated to be the reduction of inflation and inflation expectations, which suggests that monetary policy will remain restrictive in the second quarter.
Enquiries
Northern Trust International Fund Administration Services (Guernsey) Limited
Harry Rouillard +44 (0) 1481 74 5315
Risk Factors
Acquiring shares in the Company 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 the Company (and therefore the Fund) should consult an authorised person specialising in advising on such investments. Any person subscribing for Shares must be able to bear the risks involved. These include, among others detailed in the Company'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 will invest in illiquid securities.
• Past results of the Funds' investment manager is not necessarily indicative of future performance of the Fund, and the Funds' performance may be volatile.
• An investor could lose all or a substantial amount of his or her investment.
• The investment manager has total investment and trading authority over the Fund, and the Fund is dependent upon the services of the investment manager. The use of a single advisor could mean lack of diversification and, consequently, higher risk.
• 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 Manager's incentive compensation, fees and expenses may offset the Funds' 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 Funds' 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 Interests and therefore reference should be had to the Company's Prospectus and related offering documentation for a complete description of these and other relevant risks.
This information is provided by RNS
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