Re. Lehman Brothers
BH Macro Limited
17 September 2008
BH Macro Limited (the' Company')
(a closed-ended investment company incorporated with limited liability under the laws of Guernsey with registered number 46235)
Update on Brevan Howard Master Fund Limited
Given recent market developments and their impact on several global financial institutions, I would like to provide a brief update on Brevan Howard Master Fund Limited’s (the “Master Fund”) current exposures.
As at 12th September 2008, the NAV of BH Macro Limited USD Shares is down 1.16% month-to-date (-1.22% for EUR Class and -1.06% for GBP Class), bringing the year-to-date performance to 16.00% (16.94% for EUR, 18.15% for GBP).
Our approach to counterparty risk continues to be very cautious.
The Master Fund has only very small direct trading or prime brokerage exposure to Lehman Brothers or any other counterparty currently suffering visible distress. The Master Fund has multiple prime brokers and trading counterparties and maintains strict exposure limits to them; Brevan Howard Asset Management LLP (“BHAM”) is comfortable with the current levels of the Master Fund’s exposure to any single counterparty.
BHAM has taken steps to simplify the Master Fund’s portfolio and maximise liquidity, a process which has been ongoing for more than twelve months. The overall number of line items has been reduced by one-third and the total number of swaps has been significantly reduced. Also, the balance sheet has been shrunk to limit gross exposure. Further, the unencumbered asset level (i.e. US T-Bills and cash) is at approximately 75%. These assets are predominantly held in custodial accounts at entities to which the Master Fund has little or no trading exposure.
The funding of government bonds is managed by BHAM’s Treasury team which has extended the Master Fund’s funding terms so that it currently has less than 5% of positions rolling overnight. This means that the Master Fund has only very limited current exposure to money markets, which are experiencing stress.
The Master Fund’s level of market risk remains low and its positions are predominantly in the most liquid markets. We believe this is appropriate given the current conditions of severe volatility and illiquidity. We also believe that markets will continue to experience stress in the short-term at the very least. We will continue to be extremely cautious regarding whom we trade with and the exposures we take.
Sincerely,
Alan Howard
Chief Investment Officer and Joint Chief Executive Officer
Brevan Howard Asset Management LLP
Disclaimer/important information:
BH Macro Limited (the 'Fund'), is a feeder fund investing in the Brevan Howard Master Fund Limited (the “Master'). Brevan Howard Asset Management LLP ('BHAM') has supplied the following information regarding the Master Fund’s September 2008 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 the Master Fund 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 the Master Fund 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
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