BH Macro posts first results since combination with BH Global – BH Macro has posted its first set of results since the combination of BH Macro and BH Global, which was completed this year. The results represent the six months to 30 June 2021.
During the period, the NAV per sterling share in the company was up by 1.2% while the NAV per US dollar share was up by 1.3%. The share price total return on a sterling share was -3.98% and on a US Dollar share was -2.50%. The chairman of the board said the poor performance is attributable to the fall in the share price between 21 January and 25 January when the sterling shares fell 8.99% and the US Dollar shares fell 5.95%.
He said: “This fall eliminated the premium in the share price and was precipitated by the receipt and publication of a letter from Brevan Howard Capital Management, regarding proposed changes to the management agreement.”
Extract from chairman’s report:
Few Shareholders will be unaware of the sequence of events and the degree of uncertainty that surrounded the Company for a short period of time, and in my statement I shall simply give a brief summary. The Company’s Manager requested, having demonstrated that the Company had achieved the levels of return and risk diversification that were implicit at the time of the flotation, that the Board seek the approval of Shareholders to reverse substantially, but not entirely, the fee concessions that had been granted in earlier years. After extensive consultation with major Shareholders, the Company’s Advisors, and the Manager, the Board recommended to Shareholders that the increase in fees should be put to a vote and accordingly at an EGM on 29 March 2021, 82.46 percent of voted share rights voted in favour of the changes. At the same time, a tender offer was put in place for those Shareholders who did not wish to suffer the fee increase and wanted an opportunity to exit the Company.
During the course of those consultations, it became clear that the liquidity in the shares remained a major concern for a number of substantial Shareholders. This issue had been raised in the past on numerous occasions by a number of Shareholders.
A potential solution was to enter into discussions with BH Global Limited (“BH Global”), a London listed Guernsey registered investment company also managed by the Manager and where there was a significant overlap in investment strategy. Again, an extensive process of consultation and negotiation was entered into between the Board, the Shareholders, the Manager and the Company’s Advisors. A similar process was undertaken by the board of BH Global under the chairmanship of Sir Michael Bunbury. Whilst this proposal was positively received by a large percentage of Shareholders, an obvious impediment to a combination was the considerable cost of the process as set out in the Directors’ Report to effect this combination of BH Macro and BH Global which both entities would carry. It would have been difficult, if not impossible, to recommend to Shareholders such a process if it could diminish NAV. I am delighted to report that the Company’s Manager, Brevan Howard Capital Management LP, offered a solution by which they effectively underwrote this cost such that should both boards and Shareholders wish to combine then the process would not diminish the NAV of BH Macro as the continuing entity. Fuller details of both the tender offer and the combination process are set out in the Directors’ Report. The impact of this tender and combination is that BH Macro will be a substantially larger Company with hopefully greater liquidity in its shares.
The macro economic outlook remains confused with significant geopolitical tensions. The COVID-19 pandemic is yet to be resolved, vaccination programmes vary considerably across the globe, and the prospect of new variants remains. The unprecedented injection of liquidity coupled with the severe disruption to supply chains has led to inflationary pressures, currently regarded as transitory by most. While some economies are rebounding strongly, notably the USA and UK, the longer term outlook remains uncertain.
Moving into the second half of the year, the divergences are poised to increase. Emerging market central banks are raising rates to defend their currencies and combat inflationary pressures. Smaller developed market central banks are moving at various speeds to unwind quantitative easing and begin rate normalisation. The Federal Reserve, which had led the way in terms of inflation overshooting, will begin the debate about tapering quantitative easing and define an outcomes-based policy that could lead to lift-off as soon as the end of 2022 if the economy maintains its momentum or later if the economy suffers a setback from various downside risks like a renewed surge in COVID-19, a drop-off in fiscal support, or a global slowdown. Meanwhile, the Euro area has committed itself to further monetary policy easing as it adopts a symmetric 2% inflation target and an acceptance of ex-post inflation overshooting as fiscal policy easing is deployed.
Against this background the investment strategy of the Company should provide diversification to other asset classes and the shares remain one of the few ways for the individual investor to acquire access to a long established macro-economic hedge fund.
I look forward to welcoming all the new Shareholders to BH Macro who have taken part in the combination with BH Global. We look forward with confidence to the future development and performance of the Company.
BHMG : BH Macro posts first results since combination with BH Global