Is Brevan Howard Macro a profitable choice for investment?
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For smaller investors seeking to diversify their portfolios, investment trusts offer a unique opportunity to gain immediate access to a variety of asset classes, including alternative and less liquid assets, with professional management and the potential for smoother income returns. One such investment trust is BH Macro, which provides a way for the average investor to access the Brevan Howard Master Fund, one of the world's leading hedge funds.
BH Macro, an investment trust that falls into the "hedge fund" sector, has a fixed pool of capital, giving its managers the flexibility to pursue differentiated strategies that might take time to pay off. The closed-ended structure of investment trusts allows them to invest in less liquid or longer-term assets without the need to sell assets to meet investor redemptions, a constraint faced by open-ended funds.
Moreover, investment trusts can use gearing (leverage) to potentially amplify returns and smooth income distributions by retaining a portion of earnings to maintain steady dividends even in downturns. BH Macro, in particular, offers an 11% discount to its net asset value (NAV), providing an opportunity for savvy investors to buy into one of the world's leading hedge funds and build diversification into their portfolios.
Since its inception, BH Macro has produced a net asset value return of 8.8% with little volatility. Fees for BH Macro vary from year to year, but the investment managers have an incentive to perform as the trust's 8.8% annual return is presented after fees. The trust's unique fee deal with the hedge fund includes a 1.5% management fee, a 0.5% administration fee, and a 20% performance fee.
Brevan Howard, the flagship fund managed by BH Macro, manages $12 billion for clients and follows a "macro" strategy, making money by betting on the economy, interest rates, bonds, foreign exchange (FX), commodities, and equities markets. Richard Horlick, chair of BH Macro, states that the trust has historically produced strong returns with low structural correlation to equity and bond markets.
Investment trusts, such as BH Macro, are designed to hold alternative assets such as infrastructure, real estate, private equity, and more. Brevan Howard's traders look for positions with "convexity of returns," meaning multiples of upside compared to limited downside. The fund employs a sophisticated risk-management system looking at thousands of trades and risks to ensure the safety of its investors' capital.
In conclusion, BH Macro offers a unique opportunity for smaller investors to gain access to a leading hedge fund and diversify their portfolios into different asset classes with an initial investment of a few hundred pounds. With its closed-ended structure, gearing benefits, and potential for smoother income returns, BH Macro is an attractive investment option for those seeking to build a more robust and diversified portfolio.
[1] Investment Association, "Investment Trusts," Accessed 24 April 2023, https://www.theinvestmentassociation.org/investment-trusts/ [2] BH Macro, "About BH Macro," Accessed 24 April 2023, https://www.bhmacro.com/about/ [3] Financial Times, "Investment Trusts: A Guide for Investors," Accessed 24 April 2023, https://www.ft.com/content/1745952c-1d7a-4256-b499-d350742745a2 [4] Morningstar, "BH Macro Investment Trust," Accessed 24 April 2023, https://www.morningstar.co.uk/uk/funds/snapshot/snapshot.aspx?id=GB00B194WZ08 [5] The Economist, "Investment Trusts: The Case for Closed-End Funds," Accessed 24 April 2023, https://www.economist.com/finance-and-economics/2021/05/30/the-case-for-closed-end-funds
- BH Macro, an investment trust, provides an opportunity for average investors to access the Brevan Howard Master Fund, a world-leading hedge fund, allowing for diversification into various asset classes like property, bonds, and real-estate.
- The closed-ended nature of investment trusts, such as BH Macro, enables them to invest in less liquid or long-term assets, without the need to sell assets to meet redemptions, a constraint faced by open-ended funds.
- Investment trusts like BH Macro can use gearing to potentially amplify returns and smooth income distribution by retaining a portion of earnings, even in market downturns.
- Brevan Howard, managed by BH Macro, follows a macro strategy, focusing on making money through investments in interest rates, economics, bonds, foreign exchange, commodities, and equities.
