Portfolio diversifier: BH Macro

 

 

BHMG’s role as a portfolio diversifier looks increasingly relevant in today’s markets….by William Heathcoat Amory

 

Overview

 

BH Macro (BHMG) is a listed fund which offers exposure to the flagship macro hedge fund managed by Brevan Howard, one of the most successful hedge fund firms globally, which currently runs approximately $35bn.

BHMG has delivered strong risk-adjusted NAV returns

in absolute terms, but its attractions are enhanced thanks to its historic track record as a powerful diversifier. The best periods for BHMG returns tend to be those when equity markets are struggling and there is volatility. On the downside, BHMG’s monthly losses have been limited as a result of trade structuring, portfolio diversification, and a strong risk-management process (see Portfolio). This gives rise to the convex nature of returns: BHMG has only suffered three negative years in terms of NAV performance since the IPO in 2007, and in these years NAV has been down by a few percentage points, yet in its best years it has delivered upwards of 20%.

More recently, NAV returns have been in line with the expected range but relatively muted, especially in the context of a surging equity market. In this scenario, it is perhaps unsurprising that the discount to NAV has been persistent (see Discount). This does nothing to alter the fact that BHMG may potentially act as a low-volatility compounder to form the core of a long-term investment portfolio. Perhaps of increasing relevance to today’s investor, it may act as a diversifier within equity and bond portfolios, given that the returns of Brevan Howard Master Fund Limited can potentially be very different, and hopefully complementary, to equity and bond returns.

Indeed, amongst other ‘risk-off’ trusts, there are signs that market participants are starting to value trusts which offer defensive or less highly correlated exposures. For example, Ruffer Investment Company (RICA) has seen its discount narrow since February 2026, and for a period recently traded at a premium to NAV, which compares to the experience of most of the period 2023 to 2025, when it traded at around a 5% discount. As we discuss in the Performance section, BHMG has performed well when compared to RICA and other lower volatility/defensive peers, yet trades on a wider discount. Increased firepower (see Discount) for buybacks and the launch of a new private fund by Brevan Howard which may invest in BHMG’s shares (as well as other funds run by Brevan Howard), may may contribute to the discount narrowing and/or provide a boost to BHMG’S NAV.

 

Analyst’s View

 

In our view, the risks to a traditional 60/40 portfolio (where longer-duration bond portfolios offset risks to equities) need to be reconsidered in a world in which inflation volatility has risen. With rising inflation and a US President with an unpredictable approach to policy, there are no guarantees that a 60/40 portfolio of equities and bonds will hold its historic pattern. Indeed, 2022 saw bonds and equities correlate and fall together – meaning there were vanishingly few places to hide. BHMG was among the vehicles that delivered positive returns in that year, delivering an almost 22% NAV return vs a loss of -8% for the MSCI ACWI (in GBP).

Since then, NAV returns have been more muted, especially in the context of a surging equity market. In this scenario, it is perhaps unsurprising that the discount to NAV remains. As we highlight in the Portfolio section, this is potentially an opportunity for patient investors with longer memories to consider BHMG’s diversifying properties and the possibility for the discount to narrow should of the market more fully appreciate BHMG’s unique attractions.

In this context, BHMG may look increasingly relevant for investors wishing to build a truly diversified investment portfolio. President Trump’s unpredictable approach to policy may continue to have repercussions around the world for years to come. Diverging central bank responses to economic shocks, such as that posed by the war in Iran, are typically a rich seam of opportunity for macro traders such as Brevan Howard’s team, and so the current discount may be an attractive entry point for those who wish to get access.

 

Bull

 

• Highly differentiated investment proposition, with no directly comparable product available on listed market
• Diversifier to equities and bonds – strongest performance has historically come at periods of market stress
• High-quality characteristics, with long and consistent track record, a large and liquid asset base, and experienced independent board

 

Bear

 

• Opaque underlying positioning
• Can go through periods of relatively lacklustre returns
• Higher fees than traditional funds and trusts

 

Read the latest research on BH Macro here >
 

 
_{Disclosure – Non-Independent Marketing Communication
 
This is a non-independent marketing communication commissioned by BH Macro. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.}

The post Portfolio diversifier: BH Macro appeared first on USNewsRank.