Monthly Shareholder Report

RNS Number : 7942Z

BH Macro Limited

28 September 2009

 



BH Macro Limited Monthly Shareholder Report
28 August 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 August 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 28 August 2009) Shares Class NAV (USD mm) NAV per Share USD Shares 741.0 $16.52 EUR Shares 449.6 €16.58 GBP Shares 622.3 1697p 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 14.16 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 14.57 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 2.91 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 14.11 * 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.  In addition, BHMF is subject to an operational services fee of 50bps per annum.  PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS

FAS 157 Asset Valuation Categorisation	Brevan Howard Master Fund Limited (the 'Master Fund') Unaudited Estimates as at 28 August 2009 % of NAV (Gross Market Value) Level 1 57% Level 2 43% Level 3 0% Source: BHAM The estimates set out above are unaudited and have been calculated by BHAM using the same methodology as that used for the 2008 audited financial statements of BHMF. 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.
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August 2009 Performance Review	During the month, BHMF made money in fixed income directional and volatility trades. Smaller gains were made in credit strategies. BHMF suffered small losses in FX directional trades. The other asset classes did not contribute significantly towards P/L during the month. Monthly contribution (%) to basic performance by asset class: Total Interest Rates FX Equity Commodity Credit Other June 2009 0.71 0.93 -0.27 -0.16 0.06 0.19 -0.05 Source: BHAM - Trading in BHMF is managed on a strategy basis rather than on an asset class basis. The data in the table above does not make this distinction and instead reflects approximate gains and losses of the asset classes that comprise BHMF's strategies. Investors should therefore be circumspect as to any inferences that they draw from this data.  - 'Other' includes non-trading items such as treasury returns.
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Outlook	The following is a report from Brevan Howard Asset Management LLP, the investment manager of Brevan Howard Master Fund Limited: US The longest and deepest recession since the Great Depression appears to have ended this summer, led by a rebound in manufacturing, stabilisation in housing and fiscal stimulus. However, the outlook remains uncertain. The inventory-led expansion in manufacturing has led to a sharp 'pop' in activity (especially in autos), however, if history is a guide, inventory cycles tend to be relatively short-lived.  In addition, the contribution from fiscal stimulus is likely to peak in the third quarter and will add less to GDP growth going forward, turning into an outright drag in the second half of next year.   Meanwhile, households continue to suffer from weak labour income, the lagged effects from wealth destruction and credit constraints in the form of higher borrowing rates and reduced availability.  In our view, secular forces are aligned against the consumer as the labour market and credit market will be slow to recover.  That means above-trend growth has to come from other sectors.  With a lacklustre outlook for consumers, businesses are reluctant to spend, leaving exports, housing and government as the major sources of growth going forward. The question is whether those sectors are robust enough to offset the weakness elsewhere. Inflation continues to quietly recede, a trend that has perhaps been under-appreciated.  Earlier in the year, markets and policy makers were saying inflation had fallen by less than expected.  But inflation is a slow-moving process.  Core inflation has fallen from 2.7% to 1.4% over the last year and is poised to decelerate further still.  In fact, by some measures, inflation is already below the rates seen during the deflation scare in 2003 and the economy is much weaker now - indeed, deflation risks are being underplayed.  Developments in wages reinforce such concerns since actual wage inflation and wage expectations are falling.  Combining our inflation views with our growth forecast, we still think the recovery will be muted compared with previous expansions. Policy is likely to remain unchanged for some time.
	Europe In the EMU, data released in August showed that the economy continues to gain momentum. Q2 GDP surprised on the high side, showing a mere -0.1% quarter-on-quarter contraction. Business surveys improved for the fifth consecutive month and the improvement in the business climate is spreading across sectors rather than being solely confined to the car production sector, which has benefitted from large government subsidies. On the household side, consumer spending proved quite resilient, despite the deterioration of the labour market. Indeed, the unemployment rate has already reached the highest level since the creation of the euro. However, the pace of deterioration has eased over the last few months. A further leg-up in unemployment related to the end of the Government subsidies to firms remains a major risk for the EMU outlook. Inflationary pressures remain subdued. Inflation reached its trough in July and it started to move up in August. Looking ahead, we believe inflation will slowly rise towards the lower end of ECB comfort zone. Currently, the growth momentum of the EMU is quite positive. However, there are concerns about its medium term sustainability once the direct effects of the fiscal and monetary stimuli fade away. This explains the very cautious attitude of EMU policy makers towards the recent positive macro news. At its August meeting, the ECB maintained its accommodative monetary policy stance and it continued to monitor the market impact of its 'enhancing credit support' program (i.e. long-term funding to banks and purchases of covered bonds). We expect that they will adhere to this posture for the next few months.
	UK Data on UK economic activity continued to improve in August. The PMI surveys rose above 50 and production was strong, although much of the strength was accounted for by car production. Unemployment continued to rise, but the pace at which it is rising is clearly easing off. The housing market showed further near-term strength too, with house prices rising across a wide range of indicators, and mortgage approvals picking up sharply from their very depressed levels seen earlier in the year. Yet despite this short-term favourable news, the data also showed further evidence of the need for long-term balance sheet repair: bank loans to households and corporates fell outright. Inflationary pressures remain subdued: headline inflation continues its downward path and wage growth is at historic lows. The Bank of England judged that the vulnerability of the economy and the large amount of spare capacity was a more important policy concern than the upward revision of the near-term momentum in the economy. The Bank of England therefore decided to expand its QE programme again at its August meeting, adding a further GBP50bn of purchases, to a revised QE target of GBP175bn. There was an explicit mention of a desire to err on the side of too much policy stimulus rather than too little, because unwinding excess stimulus was considered easier than fighting persistent deflationary forces.
	Japan The Japanese economy continues to improve, although recovering the huge output losses of Q4 2008 and Q1 2009 will be a long and rocky process. In Q2, GDP expanded by a solid 0.6% quarter-on-quarter (2.3% annualised) although this undershot expectations. Business surveys continue to improve, especially in the manufacturing sector, where the PMI is heading towards the mid-50s.  As highlighted previously, the rebound is led not only by better exports - initially especially to China - but also by consumer spending. Indeed, despite dismal labour income generation, consumer spending is well-supported by fiscal policy and incentives, especially to the auto sector like in many other parts of the globe.  Going forward, the new government is probably going to provide support to the domestic economy. However, excess capacity, especially in the labour market - the unemployment rate is still surging rapidly - will continue to put downside pressure on wages and thus limit spending abilities once the stimulus has ended. Indeed, consumer prices continue to fall at an accelerating pace.
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 (2009). All rights reserved. Brevan Howard Asset Management LLP is authorised and regulated by the Financial Services Authority Registered in England, No. OC302636   ADV

 

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