BH Global profits from market turmoil – BH Global has published results for 2020 that show its US dollar share class earning returns of 22.4% in NAV terms and 21.8% for the Sterling class. Narrowing discounts meant that in share price terms the dollar class made 27.9% and the Sterling class 26.9%.
In terms of the portfolio, the statement says “As opportunities presented themselves during the year in individual funds and trading books, BHMS significantly increased the capital committed through the Single Manager Portfolio (“SMP”). At the year-end, the proportion of capital committed through the SMP of 64.7%, spread across 9 trading books or funds managed by an individual portfolio manager, was a material increase from the 40.0% a year earlier. That, together with an increase in capital committed to the Brevan Howard Alpha Strategies Master Fund (“BHALMF”) were the main determinants of a significant reduction from 43.5% at 31 December 2019 in the capital committed to the Brevan Howard Master Fund (“BHMF”) to 15.6% at 31 December 2020. Both BHALMF and the SMP added very positively to NAV growth in 2020, appreciating by 20.4% and 27.6% respectively gross of fees.”
The bulk of performance was earned in February and March – when markets were at their most turbulent – although December was also a good month for the company. The largest contribution came from trading around shifts in interest rates but trading in foreign exchange, equities, commodities and credit all made positive contributions as well. The statement also analyses performance by the type of trading book – here only the ‘macro’ and ‘rates’ books made meaningful positive contributions, with the majority of returns coming from the macro book, and the global emerging markets book was loss-making.
Fee increase
The manager’s fees are to go back up to 2% base plus a 20% performance fee following a vote held on 25 March. Shareholders approved the fee increase by 65.6% to 33.9% with 0.6% abstaining. The board will engage with the dissenting shareholders to discuss the consequences of the vote. [We thought that they should be offered a cash exit and are pleased to see that the board also announced a tender offer.]
Exit opportunity
The board has agreed with the manager that shareholders, however they voted at the EGM, who no longer wished to remain invested in the company will have the right to tender their shares at a price of not less than 98% of the NAV per share, less the associated costs of the tender. The manager has agreed not to levy the 2% fee payable to the manager in respect of a reduction of net asset value by reason of the tender offer. This means that the tender would enhance the NAV per share for shareholders that do not tender their shares. The offer will be capped at 40% of the issued share capital of each share class, excluding those shares held in treasury. Further details will be set out in a circular to shareholders to be posted during April. The timetable will be set out in the circular. Tendering shareholders will not bear the increased management fee that will apply from 1 July 2021. [This was the right thing to do for shareholders and we applaud it.]
BHGG / BHGU : BH Global profits from market turmoil