Let's Get Some Return ... Absolutely.
Updated: May 1, 2020
Why We Like BH Macro …
Diversification across asset classes is a critical element of managing your investments. At Patronus, when we construct a portfolio, we look to allocate a proportion of capital to investments that provide shelter in difficult times when other asset classes are struggling to a generate positive return. We believe BH Macro is one such investment.
BH Macro is a London-listed closed-ended investment company that invests substantially all of its assets in the ordinary shares of Brevan Howard Master Fund Limited. The investment objective of the fund is to generate consistent long-term appreciation through active leveraged trading on a global basis. Exposure is predominantly to global fixed income and currency markets, employing a combination of global macro and relative value trading strategies. The fund seeks to achieve positive returns, uncorrelated with other markets and with low volatility.
The underlying philosophy is to construct strategies, often contingent in nature, with superior risk/return profiles, whose outcome will often be crystallised by an expected event occurring within a pre-determined period of time.
We believe the decision to hold the shares depends on whether the underlying fund will perform well and provide capital protection during periods of equity market stress. In this regard, BH Macro has a good track record of providing diversification when equity markets are falling and a correlation with market volatility.
The fund performed very well during the Great Financial Crisis at the end of the last decade, growing by an average of 20% per annum in each of 2007, 2008, and 2009.
More recently, the fund has once again proved its worth at a time of severe global political and economic uncertainty caused by the COVID-19 pandemic. The increase in asset price volatility has presented opportunities to make money from macro-trading strategies.
So far this year, up until 17 April, the sterling NAV of the fund has increased by 24%. The BH Macro share price has done even better, rising by 29%, as the shares moved from a discount to NAV to a premium. This performance came at a time of significant volatility and sharp declines in risk assets and commodity prices – during the same period, the FTSE All Share Index (a basket of UK shares) fell by 24%.
As a result, at a time when large parts of a portfolio may have suffered from negative returns, an allocation to BH Macro has helped to mitigate the impact on overall performance.