Brevan Howard Global reports net asset value growth of 2.5% for the US dollar share class and 2.1% for the Sterling share class. The Chairman makes the point that “An investment in the shares of BH Global is intended to be a portfolio diversifier that is only modestly correlated with equity markets and is subject to tight risk controls such that the likelihood of material capital loss is remote. Rising equity markets of the last six years may have left such investments in their shadow. However, the time will come when the holding of a stable portfolio diversifier will, once again, come into its own.”
They have been buying back shares in an effort to control the discount and the average discounts on these two lines were narrow enough that no class closure resolution (a continuation vote by another name) was triggered for either class (the threshold is 10%). However the buybacks added value to ongoing shareholders and they account for 1.1% of the Sterling class performance and almost all of the US dollar class performance (2.1%).
The fee arrangements have changed so that there is no longer a 0.5% “over-riding fee” – there is a still a 2% base fee and a 20% performance fee charged at the company level. Readers should also note that a deal was struck with the managers that the launch costs of the fund would be paid back if the fund shrank through share buy-backs. When the Euro class was wound up those exiting shareholders paid back part of this amount to Brevan Howard. There is an outstanding liability of $20m on the remaining shares, part of which is being paid back every time the fund buys back shares but this ceases after 29 May 2015.
The manager’s statement says credit strategies added most to the NAV over the year with deals in structured mortgage binds and a bet on European interest rates staying low both paying off. They also made money from trading in currencies and from systematic trades. They lost money though betting on US interest rates and on their US equity exposure.
BHGG / BHGU : Negligible returns in 2014 for Brevan Howard Global