Over the twelve months to 31 December 2015, the Net Asset Value both classes of the shares of BH Global Limited declined modestly over a calendar year for the first time since the company was launched in May 2008. The US Dollar is the functional currency of the company and the NAV per share of the US Dollar class declined by 1.73% and that of the much larger Sterling class by 1.32%.
The main problem arose in December – a high conviction short exposure to the Euro in anticipation of more aggressive action by the European Central Bank which, in the event, was not forthcoming. Buy backs added approximately 9 pence (0.63%) and 8 cents (0.58%) per share to the Sterling and Dollar NAV per share respectively.
The majority of Q1 gains were generated in January from anticipating policy action by the European Central Bank. The Quantitative Easing announcement pushed European interest rates lower, the EUR currency lower and European stocks higher – all of which benefitted the main discretionary trades at the time. Additional gains were generated in equity index and credit trading. Systematic trading had a strong first quarter, driven by long exposures to the USD against a large number of other currencies, as well as long exposure to global bond markets and equity indices.
The early gains were subsequently lost throughout the year, in part from continuing to hold onto the European theme of weaker EUR and stronger European stocks. As these trends abated and reversed, the Master Fund incurred losses. Additional smaller losses came from option exposures around the Greek referendum. Other losses were incurred from short interest rate positioning expressing the view that the Fed was at the cusp of a rate hiking cycle, which materialised later than expected (in December 2015). Additional losses were generated in corporate credit trading and in systematic trading. During this period, the Master Fund generated gains in other areas including exposure to increased volatility in the Chinese FX market, long exposure to selected Asian interest rates markets and short exposures to currencies such as CAD and AUD
against the USD, but the gains were not sufficient to offset the losses.
During the year the Manager’s Investment Committee made a number of material changes in allocations within the Brevan Howard Multi-Strategy Master Fund, the most significant of which was to increase the allocation of funds to the Direct Investment Portfolio (“DIP”) to 30.5%, up from 23.6% twelve months earlier. The DIP is allocated directly to traders and at the year-end, consisted of five active books. Brevan Howard believe that this direct allocation will benefit the return profile of the fund. The Manager is in the process of increasing further the allocation to, and the number of traders within the DIP. The Manager expects the allocation to the DIP to increase to between 40% and 50% and the number of traders to the order of ten.
BHGG / BHGU : BH Global reports fall in NAV