Investor Newsletter

RNS Number : 0369O

BH Macro Limited

27 February 2009

 



BH Macro Limited Monthly Shareholder Report
31 January 2009	www.bhmacro.com
Disclaimer / Important information	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 following information regarding BHMF's January 2009 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
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Summary information	BH Macro Limited NAVs per share (as at 31 January 2009) Shares Class NAV (USD mm) NAV per Share USD Shares 832.02 $15.20 EUR Shares 414.31 €15.25 GBP Shares 439.46 1565p 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 6.69 -2.79 -2.48 0.77 2.78 1.13 0.76 -3.13 2.76 3.74 -0.68 20.32 2009 5.06 5.06 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 2.87 1.28 0.99 -3.30 2.79 3.90 -0.45 21.65 2009 5.38 5.38 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 6.85 -2.61 -2.33 0.95 2.94 1.33 1.21 -2.99 2.84 4.21 -0.67 23.25 2009 5.19 5.19 *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.  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 calculations made 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. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.

January 2009 Performance Review	During the month, Brevan Howard Master Fund Limited ('BHMF') made the majority of its gains in fixed income directional trades. In particular, profit was made at the short end of the EUR curve which rallied during the month. Additional profits were made at the short end of the US curve. BHMF also made profits in fixed income volatility and gamma trading; the degree of steepness of the US curve exhibited a high level of volatility in January. FX directional trades were also profitable. Historic monthly contribution (%) to total performance by asset class for BH Macro Limited (USD): Year Total  Interest Rates  FX Equity Commodity Credit Jan 5.06 3.80 0.88 -0.01 0.10 0.29 Source: BHAM Please note: trading books in BHMF are generally run on a portfolio basis rather than on an asset-by-asset basis and therefore these results do not reflect standalone gains and losses on a trading book basis. Consequently, their usefulness in analysing return contribution is limited, and investors should be circumspect as to any inferences which may be drawn from this data. For instance, the December 2008 Shareholder Report shows a loss in FX for 2008 when, in fact, the dedicated FX strategies made significant profits; the overall loss in the FX asset class was due to losses from FX exposures used to hedge certain rates positions in other macro strategies.
Outlook	The following is a report from Brevan Howard Asset Management LLP, the investment manager of Brevan Howard Master Fund Limited: US Stocks suffered their worst January ever and the economic data was also poor, with GDP falling at its fastest pace in nearly 30 years. Policy makers are doing their best to remedy the recession but we see it persisting and perhaps even worsening in the first half of 2009. Household consumption and business investment are plunging, and GDP was flattered at the end of 2008 by inventory accumulation. However, when businesses eventually re-align inventories to match slower sales, any hopes of seeing the green shoots of a recovery this spring will disappear. Meanwhile, housing - the epicentre of the economy's problems - continues to deteriorate.   The $800 billion fiscal stimulus package appears to offer some hope for the second half of the year. Indeed, our best guess is that the recession will end some time later this year, if for no other reason than the government is embarking on a spending program which is equal to almost 6% of GDP. In addition, policy makers seem serious about strengthening the banking sector. Some banks are in serious trouble and either need to be partially nationalized or their losses socialized. At least the seriousness of these problems has been acknowledged. We think markets will chop around until there is get more definitive direction from policy makers.
	Europe The EMU economy is seeing a continuation of the themes which characterized the end of 2008. The industrial sector is rapidly adjusting its production level to the falling levels of demand. Q4 2008 saw the worst quarter on record for both industrial production and GDP (-6% q/q annualized). Moreover, the contraction of activity is being accompanied by a rapid rise in unemployment. At the beginning of 2009, business surveys have shown some signs of stabilization, but at particularly low levels, which is consistent with the continued pace of economic contraction of GDP. On the financial side, the banking sector is accelerating the process of deleveraging. At the turn of the year, the flow of bank loans to the private sector dried out for the first time since the onset of the financial turmoil. The deleveraging process, which we believe is poised to continue, comes with a flight-to-quality, which is putting pressure on intra-EMU government bond spreads.  The European Central Bank lowered policy rates by 50 basis points, to 2.0%, at its January meeting (and kept rates unchanged in February). We believe that this easing process is likely to continue.
	UK The first weeks of 2009 provided further confirmation of how deep the UK recession is turning out to be. There were large falls in industrial production and overall GDP. Also, the labour market deteriorated at an accelerating pace, which is consistent with the notion that firms are preparing themselves for a deep and prolonged recession with survival being the priority.  Credit flows to the non-financial sector have essentially stopped and the latest credit conditions survey showed a substantial further tightening. In response to the outlook of a severe and prolonged recession with falling inflation, the Bank of England cut rates to 1% and the Governor announced preparations for quantitative easing. The UK government also announced a range of further guarantee programmes as part of ongoing efforts to restore the banking system to sufficient health to be able to lend again. We believe further policy stimulus on all fronts is clearly required, but will not stave off a severe recession, given the scale of deleveraging that is required.
	Japan Japan was the worst performer within the G-10 countries. Indeed, in Q4 2008 Japan GDP contracted by 12.7% q/q (annualized), the sharpest contraction since World War II and far worse than during Japan's 'lost decade'. The Japanese recession is the result of a dramatic contraction in exports, induced by the combination of the steep contraction in world demand and the sharp appreciation of the Yen experienced in 2008. The collapse of exports (-45% q/q, annualized, in Q4 2008) is compounded by the drop in investments (about -20%), as Japanese corporates find themselves needing to adjust downward the excessive production capacity which was built up during the years of the bubble. Consumer spending held up relatively well in Q4 2008 (-1.6%) due to the drop in energy prices which boosted households' purchasing power, at least temporarily, However, prospects also look dire here as job losses are surging.
Enquiries	Northern Trust International Fund Administration Services (Guernsey) Limited Harry Rouillard [phone]
Your attention is drawn to the Disclaimer set out at the beginning of this document.      BH Macro Limited is a closed-ended investment company registered and incorporated in Guernsey on 17 January 2007 (Registration Number: 46235) with its registered office at Trafalgar Court, Les Banques, St. Peter Port, Guernsey GYI 3QL, Channel Islands. © Brevan Howard Asset Management LLP (2008). All rights reserved. Brevan Howard Asset Management LLP is authorised and regulated by the Financial Services Authority Registered in England, No. OC302636   ADV01439

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