Monthly Shareholder Report - April 2015

RNS Number : 6893N

BH Macro Limited

19 May 2015

 



		BH MACRO LIMITED MONTHLY SHAREHOLDER REPORT: APRIL 2015 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) Bermuda Stock Exchange (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:	$1,742 mm¹
	1. Estimated as at 30 April 2015 by BHM's administrator, Northern Trust.
Summary Information	BH Macro Limited NAV per Share (estimated as at 30 April 2015)
	Share Class NAV (USD mm) NAV per Share USD Shares 382.8 $20.97 EUR Shares 118.4 €21.12 GBP Shares 1,241.1 £21.81
	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 -1.17* 1.70*
	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 -1.15* 1.94*
	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 -1.09* 1.93*
	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. BHM NAV per Share % Monthly Change is calculated by BHCM.  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 30 April 2015 PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS
ASC 820 Asset Valuation Categorisation*	Brevan Howard Master Fund Limited
	Unaudited estimates as at 30 April 2015
	% of Gross Market Value* Level 1 67.8 Level 2 31.6 Level 3 0.6
	Source: BHCM * These estimates are unaudited and have been calculated by BHCM 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	The information in this section has been provided to BHM by BHCM During the month, the Fund suffered losses in FX macro trading, primarily from short EUR positioning versus the US dollar. Additional small losses were incurred in other FX trading including short positioning in GBP, AUD and NZD. Small gains were made in interest rate trading, primarily from EUR curve steepening which were partially offset by losses from narrowing swap spreads. Equity trading was a small positive contributor, with small gains in Japanese equity partially offset by losses in European equity. Monthly, quarterly and annual contribution (%) to the performance of BHM USD Shares (net of fees and expenses) by strategy group Macro Rates FX EMG Equity Commodity Credit Systematic Discount Management Total April -0.62 -0.39 -0.03 -0.04 -0.01 -0.00 -0.06 -0.01 0.00 -1.17 Q1 2015 1.66 0.66 0.13 -0.04 0.03 -0.01 0.39 0.03 0.04 2.90 QTD 2015 -0.62 -0.39 -0.03 -0.04 -0.01 -0.00 -0.06 -0.01 0.00 -1.17 YTD 2015 1.03 0.26 0.10 -0.08 0.03 -0.01 0.33 0.01 0.04 1.70 Monthly, quarter-to-date and year-to-date figures are estimated by BHCM as at 30 April 2015, based on total performance data for each period provided by the Fund's administrator, International Fund Services (Ireland) Limited. Figures rounded to two decimal places. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. 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 "Discount Management": buyback activity for discount management purposes
Manager's Market Review and Outlook	The information in this section has been provided to BHM by BHCM
	US Growth disappointed in the first quarter by slowing to a standstill. Similar to last year's first quarter, unusually harsh weather played a role. In addition, the economy has struggled this year to digest the sharp slowdown in drilling activity and investment, headwinds for exports from the appreciation in the exchange value of the US dollar and a ports strike. The significant decline in gasoline prices should have provided at least some offset in consumer spending, but instead it looks like the 'tax cut' was mostly saved. Payroll employment also showed the imprint of unseasonable weather. March's job gains were the weakest since 2012. However, employment bounced back in April in the construction and hospitality sectors that were the most affected by the late winter weather. Smoothing through the volatility, the trends in the labour market have clearly slowed. Job gains recently have averaged close to 200,000 per month compared with the heady 300,000 increases last autumn. The unemployment rate has fallen to 5.4% from 5.6% at the end of last year. Nevertheless, at 5.4% the unemployment rate is within range of full employment. Indeed, the slack in the labour market has declined to the point where anecdotes about pay raises are becoming widespread. While indicators of wage pressures are mixed, the most reliable gauge, the Employment Cost Index, accelerated to a 2.6% gain over the past year. Given that the annual rate of productivity growth has averaged around 0.6% for the last four years, one could make the argument that 2.6% nominal wage growth is in line with an inflation target of 2% plus productivity growth. The market hopes for better productivity growth but the fact of the matter is it is yet to be seen so expectations about wage gains may have to be tempered. Price inflation has been and continues to be suppressed by lower energy and import prices. Core inflation has tentatively stabilised around 1.3% and should bottom in the summer before firming slightly. The Federal Reserve was quiet in April. At their meeting, they did little to change market expectations that lift-off should occur sometime later this year. However, they did nothing to sharpen the exact timing. EMU There are increasing signs that growth in the core EMU countries may have peaked in the first quarter - when GDP growth expanded by a solid 0.4% q/q - and is slowing in the second quarter amid weakening external demand. In contrast, EMU periphery continues to show, for the time being, a strong performance, being the main beneficiary of the more favourable financing conditions induced by ECB quantitative easing.  In particular, in Germany the industrial sector appears to be on a downward path, as indicated by both March industrial production and industrial orders releases, while construction and sectors more geared on domestic demand are still better supported. Spain and Ireland are the economies showing the fastest growth conditions, spurred in these cases by buoyant domestic demand. However, along with the renewed increase in oil prices, both retail sales and car registrations show signs of fatigue at pan-EMU level, after likely overshooting at the turn of the year. Money and credit figures are consistent with a gradual recovery in bank lending, but in many countries a substantial stock of legacy debt remains to be repaid. Greece remains a significant source of near term uncertainty. The discussions between the Greek Government and the Troika institutions continue unabated and while the Government's cash crunch has put speed on the negotiations, the talks will nevertheless take more time to conclude. With the April salaries and pensions finally paid last week the Government has some breathing space, although the agreement on the transfer of the savings of the local municipalities to the central Government remains to be completed. The key issues that are pressing Syriza at home are related to domestic policy.  The growing concern among the population is that the Government is not up to its tasks in terms of basic governance and it could escalate to a breaking point if the Government fails to pay the salaries and pensions at the end of May. The only way to avoid that in the short term seems to be to achieve a staff level agreement in time to allow the ECB to raise the T-bill ceiling. However a positive signal from next Monday's Euro-group will not be enough for that, the ECB will want to see real progress in all key areas before they act.  Once the May salaries and wages payments have occurred, with the expected help of the ECB, the disbursement of the remaining bailout tranches will be possible provided that a deal (possibly voted in the Greek parliament) is closed in late May/early June. Snap elections still remain a possibility. For that to happen, the Greek Government needs to be reasonably sure that it will have the money to keep the country running until the time of the voting. To be held before end-June, elections need to be called before end-May. UK The general election delivered an outright Conservative majority, wildly different from the pre-election polls. Voters moved towards the SNP and UKIP, and away from the Liberal Democrats. The first-past-the-post system ended up delivering a large increase in SNP seats almost entirely at the expense of Labour, no new UKIP seats, and a sharp drop in Liberal Democrat seats, predominantly to the benefit of the Conservatives. The macro impact is that fiscal policy is likely to turn more contractionary again, after austerity has been more or less paused in the past two years, and the next wave of austerity is expected to be front-loaded again within the Government's term of office. There is anticipated to be a significant headwind to growth in the coming two years. Recent survey indicators have been quite mixed, after having declined from a peak last summer. The official first quarter GDP data was in line with the view that growth is set to slow this year relative to last year. Our forecast remains that UK growth has transitioned from a strong pace in excess of 3% for a few quarters last year to a more moderate pace of 2-2.5% this year, below the Bank of England's forecast. Housing market activity looks likely to increase slowly, after declining for most of 2014, as there has been no additional macro-prudential tightening since May 2014, and a reduction in market interest rates. Business investment growth is unlikely to accelerate from the solid pace in 2014, and is more likely to ease off a little. An appreciation of around 3% in the trade-weighted exchange rate since the start of the year will be a moderate headwind, as will subdued growth in the rest of the world. Heightened turmoil in Greece remains an important downside tail-risk even for the UK, via both confidence and financial contagion channels. Wage inflation has faltered again after some tentative signs of improvement late last year. Strong actual and potential labour supply increases from immigration, increased participation of younger workers and longer participation of older workers are likely to keep wage growth low relative to the pre-crisis period. These forces are fundamentally changing the relationship between the unemployment rate, which is only half a point away from its pre-crisis level, and wage inflation. Inflation is expected to be much weaker than in 2014. Lower oil prices play a big role of course, but core inflation is subdued too, and the momentum in core inflation is still downward. Against a background of moderate but not booming growth, combined with weak inflationary pressure, there is no urgency for the BoE to hike rates. The May Inflation Report revised down growth and wage inflation forecasts again, but also revised down productivity growth again, leaving the medium-term inflation outlook little changed. The Report implicitly endorsed market pricing of rate lift-off in mid-2016, and a very slow pace of tightening thereafter. Japan The latest surveys of economic activity improved, the degree of which varied across reports.  The economy watchers survey index rose in March and is at its highest level since the imposition of the consumption tax hike in April 2014.  Likewise, consumer confidence also increased.  The Shoko-Chukin survey of small and medium-sized firms also moved up, but unlike the other two surveys, it remains noticeably below the levels seen before April 2014. The Bank of Japan left the pace of asset purchases unchanged in its April meeting and lowered its forecast for core inflation in 2015 and 2016 by 0.2%.  The BoJ lowered its forecast as half of the information needed to determine the fiscal-year average inflation rate for 2015 has already been determined.  Western core inflation moved up a little bit in the last couple of months, but a further substantial pick-up is needed to reach the BoJ's FY 2016 forecast. Progress on so-called third-arrow reforms appears to have slowed.  The most important development continues to be in the United States where Congress is considering to fast-track legislation, which would allow but would not guarantee a successful conclusion to TPP negotiations.  There is reasonable optimism that the Senate will approve the fast-tracked legislation, but even then the Democratic minority leader has announced he may block consideration until other bills are taken up.  From there, party leaders on both sides of the aisle will still need to convince enough recalcitrant representatives to pass the bill in the House.  China Activity in China has not yet shown any clear signs of a turnaround, remaining weak in April. The PMIs produced by both Markit (HSBC) and the National Bureau of Statistics were mixed, and the synthetic HSBC Composite PMI fell by 0.5 to 51.3. However, details of the surveys were more discouraging than the headlines, especially the new order to inventory ratio. Additionally, disinflationary pressures intensified, although slightly rebounded from its recent low. Real activity indicators including industrial production, fixed-asset investment, and retail sales in April deteriorated further. In particular, industrial production growth YTD slowed to 6.2%, the worst since the 2008 financial crisis. CPI yearly inflation rose slightly to 1.5% y/y in April, below the 1.6% consensus mostly due to falling food prices, while PPI remained in negative territory at -4.6% y/y, thus providing room for more policy easing. According to trade data in April, the trade surplus recovered from US$3bn in March to US$34bn. However, details of the report were not encouraging, as export growth was weaker than expected and imports have continued to fall in both value and quantity terms. The most notable development in China since its March National People's Congress is the rapidly falling 7-day PBoC repo rate fixing, which has fallen by nearly more than 250 bps for the past two months to below 2%. As a result of such significant policy easing, A-shares have rallied by about 30% since early March. However, the transmission mechanism from interbank rates to economic growth is less clear. Without an acceleration in credit and investments, it is questionable whether China will be able to engineer a sustainable recovery from this point.
Enquiries	Northern Trust International Fund Administration Services (Guernsey) Limited Harry Rouillard [phone]

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.

 

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