|
|
|
|
|
|
|
BH MACRO LIMITED
MONTHLY SHAREHOLDER REPORT:
SEPTEMBER 2017
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) |
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: |
$469 mm¹ |
|
1. As at 29 September 2017. Source: BHM's administrator,
Northern Trust.
|
Summary
Information |
BH Macro
Limited NAV per Share (Calculated as at 29 September 2017) |
Share Class |
NAV
(USD mm) |
NAV
per Share |
USD Shares |
61.4 |
$21.73 |
GBP Shares |
407.3 |
£21.67 |
|
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 |
-1.28 |
0.93 |
-1.01 |
0.32 |
-0.78 |
-0.64 |
-0.59 |
2.36 |
-3.48 |
-1.42 |
2016 |
0.71 |
0.73 |
-1.77 |
-0.82 |
-0.28 |
3.61 |
-0.99 |
-0.17 |
-0.37 |
0.77 |
5.02 |
0.19 |
6.63 |
2017 |
-1.47 |
1.91 |
-2.84 |
3.84 |
-0.60 |
-1.39 |
1.54 |
0.19 |
-0.78 |
|
|
|
0.24 |
|
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 |
-1.25 |
0.94 |
-0.94 |
0.28 |
-0.84 |
-0.67 |
-0.60 |
2.56 |
-3.22 |
-0.77 |
2016 |
0.38 |
0.78 |
-1.56 |
-0.88 |
-0.38 |
3.25 |
-0.77 |
0.16 |
-0.56 |
0.59 |
5.37 |
0.03 |
6.37 |
2017 |
-1.62 |
1.85 |
-3.04 |
0.54 |
-0.76* |
|
|
|
|
|
|
|
-3.07 |
|
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 |
-1.20 |
0.97 |
-0.93 |
0.37 |
-0.74 |
-0.63 |
-0.49 |
2.27 |
-3.39 |
-0.86 |
2016 |
0.60 |
0.70 |
-1.78 |
-0.82 |
-0.30 |
3.31 |
-0.99 |
-0.10 |
-0.68 |
0.80 |
5.05 |
0.05 |
5.79 |
2017 |
-1.54 |
1.86 |
-2.95 |
0.59 |
-0.68 |
-1.48 |
1.47 |
0.09 |
-0.79 |
|
|
|
-3.46 |
|
*As previously announced by the Company, the Company
determined that all remaining shares in the Euro share class be
converted into Sterling shares effective as of 29 June 2017 and all Euro shares held by the
Company in treasury were cancelled on that date. The Euro
share class has been closed and its listing has been cancelled.
Source: Fund NAV data is provided by the administrator of the Fund,
International Fund Services (Ireland) Limited (“IFS”). 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 and
all other fees and expenses payable by BHM. In addition, the Fund
is subject to an operational services fee.
With effect from 1 April 2017, the
management fee is 0.5% per annum. BHM’s investment in the Fund
is subject to an operational services fee of 0.5% per annum.
No management fee or operational services fee is charged in respect
of performance related growth of NAV for each class of share in
excess of its level on 1 April 2017
as if the tender offer commenced by BHM on 27 January 2017 had completed on 1 April 2017.
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.
Data as at 29 September 2017
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. |
ASC 820 Asset Valuation Categorisation on a non
look-through basis*
ASC 820 Asset Valuation Categorisation on a look-through
basis*
Performance Review
|
Brevan Howard Master
Fund Limited |
Unaudited as at 29
September 2017 |
|
% of
Gross Market Value* |
Level 1 |
82.1 |
Level 2 |
12.9 |
Level 3 |
0.0 |
At NAV |
5.0 |
Source: BHCM
* This data is unaudited and has been calculated by BHCM using
the same methodology as that used in the most recent audited
financial statements of the Fund. The relative size of each
category is subject to change. Sum may not total 100% due to
rounding.
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.
At NAV: This represents the level of assets in the portfolio
that are invested in other Brevan Howard funds and priced or valued
at NAV.
|
% of
Gross Market Value* |
Level 1 |
86.6 |
Level 2 |
13.4 |
Level 3 |
0.0 |
Source: BHCM
* This data reflects the combined ASC 820 levels of the Fund and
the underlying allocations in which the Fund is invested,
proportional to each of the underlying allocation’s weighting in
the Fund’s portfolio. The data is unaudited and has been calculated
by BHCM using the same methodology as that used in the most recent
audited financial statements of the Fund and any underlying funds
(as the case may be). The relative size of each category is subject
to change. Sum may not total 100% due to rounding.
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.
The information in this section has been provided to BHM by
BHCM.
FX trading was the main detractor as the USD strengthened
against various crosses including the euro. Gains from short
positioning in US interest rates were offset by losses in yield
curve trading as well as from relative value trading of European
government bonds. Small losses from tactical positioning of
commodity and equity indices were largely offset by gains from
emerging market trading.
The performance review and attributions are derived from data
calculated by BHCM, based on total performance data for each period
provided by the Fund’s administrator (IFS) and risk data provided
by BHCM, as at 29 September 2017.
|
|
Performance by Asset Class
Monthly, quarterly and annual
contribution (%) to the performance of BHM USD Shares (net of fees
and expenses) by asset class as at 29
September 2017
2017 |
Rates |
FX |
Commodity |
Credit |
Equity |
Tender Offer |
Total |
September 2017 |
-0.08 |
-0.52 |
-0.16 |
0.02 |
-0.04 |
0.00 |
-0.78 |
Q1
2017 |
0.25 |
-3.06 |
-0.01 |
0.28 |
0.12 |
0.00 |
-2.44 |
Q2
2017 |
-1.81 |
-0.48 |
-0.14 |
-0.02 |
-0.14 |
4.46 |
1.79 |
Q3
2017 |
-0.52 |
1.55 |
0.00 |
0.09 |
-0.18 |
0.00 |
0.94 |
YTD
2017 |
-2.07 |
-2.04 |
-0.14 |
0.35 |
-0.20 |
4.46 |
0.24 |
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
Methodology and Definition of
Contribution to Performance:
Attribution by asset class is produced at the instrument level,
with adjustments made based on risk estimates.
The above asset classes are categorised as follows:
“Rates”: interest rates markets
“FX”: FX forwards and options
“Commodity”: commodity futures and options
“Credit”: corporate and asset-backed indices, bonds and
CDS
“Equity”: equity markets including indices and other
derivatives
“Tender Offer”: repurchases under the tender offer
launched on 27 January 2017.
Performance by Strategy Group
Monthly, quarterly and annual
contribution (%) to the performance of BHM USD Shares (net of fees
and expenses) by strategy group as at 29
September 2017
2017 |
Macro |
Systematic |
Rates |
FX |
Equity |
Credit |
EMG |
Commodity |
Tender Offer |
Total |
September
2017 |
-0.58 |
-0.02 |
-0.15 |
-0.06 |
-0.00 |
0.01 |
0.01 |
-0.00 |
0.00 |
-0.78 |
Q1 2017 |
-2.29 |
-0.03 |
-0.18 |
-0.51 |
-0.00 |
0.35 |
0.23 |
-0.00 |
0.00 |
-2.44 |
Q2 2017 |
-2.64 |
-0.08 |
0.17 |
0.01 |
-0.00 |
0.01 |
-0.05 |
-0.00 |
4.46 |
1.79 |
Q3 2017 |
0.82 |
0.05 |
-0.24 |
0.03 |
-0.00 |
0.06 |
0.21 |
-0.00 |
0.00 |
0.94 |
YTD 2017 |
-4.08 |
-0.06 |
-0.25 |
-0.47 |
-0.00 |
0.42 |
0.39 |
-0.00 |
4.46 |
0.24 |
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
Methodology and Definition of
Contribution to Performance:
Strategy Group 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)
“Systematic”: rules-based futures trading
“Rates”: developed interest rates markets
“FX”: global FX forwards and options
“Equity”: global equity markets including indices and
other derivatives
“Credit”: corporate and asset-backed indices, bonds and
CDS
“EMG”: global emerging markets
“Commodity”: liquid commodity futures and options
“Tender Offer”: repurchases under the tender offer
launched on 27 January 2017.
|
Manager's Market Review and Outlook |
The information in
this section has been provided to BHM by BHCM |
US
The impact of the hurricanes that hit the US in September has made
it difficult to assess the underlying strength of the economy.
Payroll employment fell in September, but the unemployment rate,
which should be unaffected by the weather because of the way the
data is collected, dropped to a new cycle low of 4.2%, even as the
participation rate moved up. At the same time, average hourly
earnings rose strongly, bringing the y/y increase to a business
cycle high of 2.9%. The jump in wages corroborates the message of
tighter resource utilisation in the low unemployment rate.
The hurricanes also appear to have impacted the data on aggregate
demand. Motor vehicle sales benefited from replacement demand but
retail sales may have been held back by the widespread disruptions
to life and property. Nevertheless, tracking estimates of Q3 real
GDP growth point to above-trend growth and the momentum appears to
be well-maintained into Q4, which should see rebuilding begin to
add to growth. The business sector looks especially healthy.
Capital expenditures are growing briskly and expectations for
further increases are elevated. Various national and regional
surveys of manufacturing activity are at, or near, business cycle
highs. If anything, the business sector looks more “mid-cycle” than
“late-cycle”, even though the expansion has entered its ninth
year.
Inflation remains stuck in a low gear, reflecting tame energy
inflation and core inflation depressed mostly by a variety of
idiosyncratic declines. The latest Consumer Price Index (“CPI”)
report bounced back after five months of downside surprises. It
remains to be seen whether tightening labor markets, higher import
prices, and tentative signs of stabilisation in measures of
inflation expectations, will lead to higher inflation going
forward.
The Federal Reserve (“Fed”) began normalising its balance sheet in
October without disrupting financial markets. With balance sheet
run-off in the background, the Fed’s leadership appears comfortable
balancing the various risks to the outlook by continuing a path of
gradual rate hikes. Elsewhere in Washington, lawmakers turned their
attention to fleshing out the details of the so-called “Big 6’s”
blueprint for tax reform. The blueprint was long on goals and short
on details or how to pay for tax cuts. In the coming months,
Congress will have to make some hard choices about how to turn the
blueprint into legislation. As seen with efforts to reform health
care, the strong desire among the Republican Party to make changes
does not necessarily translate into legislative success.
UK
Although economic activity in the UK has remained relatively soft,
the labour market has continued to improve: GDP grew 0.3% q/q in
Q2, unchanged from the pace seen in Q1 (which was revised up
0.1ppts to 0.3%). Consumption was particularly weak in Q2,
reflecting the decline in real incomes. Recent data remains
relatively weak; the Index of Services (“IoS”) fell 0.2% m/m in
July pointing to another soft GDP print in Q3. Meanwhile, the
composite Purchasing Managers’ Index (“PMI”) has been relatively
stable in recent months, most recently recording 54.1 in September,
suggesting that the current pace of growth should be consistent
with recent trends, at or slightly below, potential growth. This
month there was a large fall in the construction PMI, pointing
towards downside risks in business investment. The outlook for the
consumer was a little more mixed; consumer confidence ticked up
slightly in September and retail sales have improved in recent
months. However, the moderation in house price growth and slowing
in consumer credit growth may weigh on consumer spending going
forward. In general, the depreciation in sterling compared to its
level in June 2016 should support
growth. However, the uncertainty around Brexit may limit sterling’s
influence on growth, especially if companies boost margins rather
than production. Hence, the weakness of the currency may not prove
as stimulative as previous instances of sterling depreciation.
Meanwhile, employment has continued to grow at a moderate pace of
1.2% y/y as of July. This has been enough for the unemployment rate
to continue its downtrend, reaching 4.3% in July, the lowest rate
since 1975. Inflation rose 0.3ppts to 2.9% y/y in August. Consumer
inflation has been trending upwards since the referendum vote on
the membership of the European Union, on account of the lower
exchange rate. Indicators of domestically generated inflation
remain relatively modest; wage inflation was unchanged at 2.1%
3m/12m in July. The weakness in wages has occurred despite record
low levels of the unemployment rate. However, there are some signs
that there may be a pick-up in wages on the horizon; both the
Recruitment and Employment Confederation’s JobsOutlook survey and
the Bank of England’s labour market tightness survey suggest some
potential for higher wage growth. The mix of high consumer
inflation and modest wage inflation has led to a deterioration in
real wages, which has weighed down consumption in the first half of
2017. As wages strengthen, and the influence of the exchange rate
on consumer prices wanes, real wages should eventually recover in
the second half of the year.
At the Bank of England’s Monetary Policy Committee (“MPC”) meeting
in September, seven members voted to keep the current policy rate
unchanged at 0.25% (there was one more voter compared to the
previous meeting as Sir David Ramsden joined the MPC), whilst there
were still two members who voted for a 25 basis point (“bp”)
increase in the policy rate. However, the majority of the MPC
judged that “if the economy continues to follow a path consistent
with the prospect of a continued erosion of slack and a gradual
rise in inflationary pressure, then some withdrawal of monetary
stimulus is likely to be appropriate over the coming months in
order to return inflation sustainably to target”, suggesting that
the MPC may raise the policy rate by 25bps as soon as November. The
lessening in the trade-off between high inflation and ample slack
(due primarily to a further fall in the unemployment rate) had made
it harder to justify an overshoot in the inflation target as was
forecasted in the August Inflation Report, even though economic
activity has been lacklustre in the first half of the year. In
addition, the Governor of the Bank of England Mark Carney argued in
a speech that the disinflationary influences from the Brexit vote
had been deferred, whilst most of the inflationary channels linked
to a lower supply shock (also as a result of Brexit vote) had begun
to appear. Meanwhile, the first phase of the Brexit negotiations
(which include the Exit Bill, Citizen Rights and the Irish border)
are still ongoing. The European Parliament recently voted that
there has been insufficient progress in Brexit negotiations, which
effectively stalls the start of the second phase of negotiations
regarding the future relationship of the UK and the European
Union.
EMU
After a relatively soft start to Q3, in August EMU activity
rebounded, although retail sales remained weak. Industrial
production grew strongly by 1.4% m/m (0.1% in July) led by Germany
(+3% m/m) and car registrations increased in the four main
economies. However, retail sales fell by another 0.5% m/m, thus
compounding the drop recorded in July (-0.3% m/m). In September,
business surveys indicate a strong end for the quarter, the EMU
Composite PMI rose by a full point to 56.7, thus approaching the
cyclical highs recorded in the spring. Inflation is less
encouraging than activity, the growth rate of the Harmonised Index
of Consumer Prices (“HICP”) stood in September at 1.5% y/y, a touch
below consensus forecasts, while core inflation fell from 1.2% y/y
to 1.1% y/y, also below market expectations. Indeed, the dynamics
of core inflation do not signal, for the time being, the
self-sustained recovery envisaged by the European Central Bank
(“ECB”). Moreover, the effects of the recent appreciation of the
euro are already visible in the renewed drop of import prices.
China
Activity data was mixed in September. The official PMI was stronger
at 52.4 in September versus 51.7 for August, but the Caixin PMI was
weaker at 51.0 for September versus 51.6 in August. Fixed Asset
Investment growth was recorded at 7.5% for September, slightly
worse than the 7.7% expected. Industrial production growth was
stronger at 6.6% for September. Retail sales also strengthened and
printed 10.3% y/y for September. Inflation fell to 1.6% from 1.8%
in August. Producer prices were again higher than the prior month
printing 6.9%. On the external side, export data improved to 8.1%
y/y for September and imports rose to be 18.7% y/y, up from 13.3%.
The seven day repo rate on average was 3.38% for September compared
to 2.99% for August.
Japan
Prime Minister Shinzo Abe’s gambit to call lower house snap
elections paid off. His Liberal Democratic Party
(“LDP”) appears to have lost only a handful of seats. However,
the number of total seats shrunk, so the share may have actually
improved. The result is at the higher end of optimistic
scenarios. Along with a small coalition partner, Prime Minister Abe
has a two-thirds supermajority in the lower house. He already
retains a great advantage in the upper house. Given the
electoral success, Prime Minister Abe has consolidated his control
within the party, and hence, should have a free reign to implement
his agenda.
There are two easily identifiable implications for investors.
Governor of the Bank of Japan (“BoJ”) Haruhiko Kuroda’s term ends
in April. Given the opportunity, it is expected that the
Prime Minister would reappoint him and keep the current policy
regime in place. The current regime has successfully stabilised
inflation but, has so far, been incapable of shifting inflation
expectations upward to sustain inflation at 2%. The BoJ now appears
out of ideas to shock expectations. A strong depreciation in the
yen is not likely to happen soon given the relatively strong
performance of the real economy in Japan, and a lack of dollar
strength. Hence, if Japan is to see additional inflation it will
have to be achieved by moving up the Phillips curve. Indeed, the
BoJ assumes that tight labour markets will soon lead to wage gains
that are passed through to prices. However, with the relationship
between the level of economic activity and price inflation rather
flat, progress is likely to be slow at best. The combination of BoJ
optimism and a flat Phillips curve suggests no further
accommodation despite weak inflation. Moreover, it appears that the
likely alternative to Governor Kuroda would be a more conservative
monetary policy, which would be even less capable of pushing up
inflation expectations.
The other major economic policy consideration is the planned
consumption tax hike. October 2019 is
far enough in the future that its status has little impact on
current activity and inflation expectations. Nonetheless, it needs
to be kept in mind that the Government has in the past
underestimated the fallout from tax increases. In past cases the
economy slowed more severely than predicted. Prime Minister Abe has
announced his intention to keep the planned tax hike in place in
order to put Government finances on a more sustainable basis.
As has been the case for a while, current economic activity remains
solid. The Tankan Survey indicates improved conditions, index
levels in the latest release are at their highest levels since
before the financial crisis. Other surveys, such as the
Shoko-Chukin Survey of small and medium-sized industries and the
Economy Watchers Survey remained solid. Industrial production has
been trending up for a year. The latest GDP figures are a bit
stale, nonetheless, suggesting solid, above-trend, growth. |
Enquiries |
The Company
Secretary
Northern Trust International Fund Administration Services
(Guernsey) Limited
bhfa@ntrs.com
+44 (0) 1481 745736 |
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.