Investor Newsletter

RNS Number : 3655P

BH Macro Limited

24 March 2009

 



BH Macro Limited Monthly Shareholder Report
28 February 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 February 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 February 2009)* Shares Class NAV (USD mm) NAV per Share USD Shares 848.61* $15.62* EUR Shares 410.00* €15.65* GBP Shares 464.32* 1609p* 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 2.81* 7.95* 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 2.73* 8.16* 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 2.79* 8.17* * Estimates as at 28 February 2009 ** 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.

February 2009 Performance Review	During the month, Brevan Howard Master Fund Limited ('BHMF') made the majority of its gains in fixed income directional and curve trades. BHMF also made money, to a lesser extent, in fixed income relative value positions. BHMF made small losses in directional FX trades.  Estimated historic monthly contribution (%) to total performance by asset class for BH Macro Limited (USD): Total Interest Rates FX Equity Commodity Credit February 2009 2.81* 2.94 -0.41 0.16 0.12 0.00 * Estimate as at 28 February 2009 Source: BHAM Please note: 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 regarding the manner in which trading in BHMF is managed. For example, the December 2008 Shareholder Report shows a loss in FX for 2008 when, in fact, dedicated FX strategies were profitable. The overall loss attributed to FX 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 Economic news and data releases during February were extremely negative. Output is falling sharply with GDP contracting more than 6% during Q4 2008 (annualised, quarter-on-quarter) at the end of last year and little respite is expected in the current quarter. The labour market continues to suffer with the unemployment rate nearing 8%. All aspects of housing - inventories, prices, turnover, and starts - are bad or getting worse. Those analysts looking for the green shoots of recovery have been sorely disappointed.   In response to worsening economic prospects, equity markets continued to melt down in February. At the beginning of the year, the Obama team hoped to stabilise markets and lay out an economic recovery plan. This has not fully materialised. The Treasury's financial stability plan looks more like a placeholder for a bigger plan and the economy's woes seem to dwarf the stimulus package. To make matters worse, the Administration has promised higher future taxes to pay for the stimulus as well as other campaign promises; a move that is reminiscent of Japanese fiscal policy during the 'lost decade'. Meanwhile, the Fed concentrated its energy on getting the Term Asset-Backed Securities Loan Facility up and running but failed to meet the February deadline. In the absence of timely or comprehensive solutions from policy makers, it appears likely that recent trends in capital markets will persist.
	Europe Activity data released in February pointed to an ongoing severe contraction across all EMU countries. The stabilisation of data in business surveys that was observed in January proved to be short-lived and business confidence deteriorated further in February across all major sectors of the economy. At the same time, the labour market is meaningfully deteriorating, which will induce further negative feedback effects through lower disposable income and consumption. Overall, we believe that the EMU economy will continue to contract over the coming quarters, shaping up to be possibly the worst recession since the Second World War.  The EMU banking sector is undertaking a massive deleveraging process. At the same time, banks have increasing concerns about their exposure to leveraged entities inside and outside the EMU. We believe that the likelihood of adverse feedback effects from the banking situation and the economy has been increasing. After lowering policy rates in January, the ECB paused in February, followed by a 50bp cut on 05 March 2009. As policy rates are approaching their lower limit, the ECB seems to have started to consider 'non standard' forms of policy stimulus, such as direct purchases of assets.
	UK February activity data pointed to an ongoing severe contraction across all major sectors of the UK economy, as well as a sharp rise in unemployment. In time, we believe that these factors are likely to push the CPI dynamics well below the BoE's inflation target.  In response to this outlook, the BoE cut rates by another 50bps at their February meeting and made it clear that a significant further amount of monetary policy stimulus was needed. As interest rate cuts have been nearly exhausted, this policy stimulus will also take the form of quantitative easing. There was further policy action on the financial stability front, with a new government injection of bank capital, and a ring-fence guarantee on specific assets on bank balance sheets in exchange for a commitment to lend to households and non-financial firms. While these policies are useful in limiting damaging adverse feedback effects from the deleveraging process, they do not eliminate the need for deleveraging itself, which will simply take place over a longer time horizon.
	Japan Japan is going through its worst recession since the end of the Second World War. Survey data released in February signalled some very early signs of a bottoming out in manufacturing, but continued to show meaningful deterioration in the larger services sector. Indeed, the impact of the collapse of the industrial sector over previous months is spreading to the rest of the economy, as the labour market is deteriorating fast. The job-to-applicants ratio has already plunged to the lowest level in seven years. The wealth effect deriving from the sharp fall of equity prices (about -60% from 2007 highs and about -18% year-to-date), is compounding the compression of the expectations of labour income.  The steep fall of activity in January, across industrial production, net exports and consumption (as shown by Cabinet Office indicators) suggest that the contraction of GDP in Q1 2009 will be of a magnitude comparable to Q4 2008.
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   ADV01483

 

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