Trustnet Magazine Issue 45 November 2018 | Page 32

In focus
[ PENSION ]
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This hedge fund-style strategy feeds off volatility, making it a
potentially useful diversifier with the end of the cycle approaching
BH Macro
both 2008 and 2009 at a time when
equity markets were tanking.
Therefore, it could be one
option to hedge against further
instability with the end of the cycle
approaching. Numis Investment
Companies recommends the trust
as a core buy, describing it as an
attractive portfolio diversifier at a
time of increased volatility in equity
markets.
However, this diversification
doesn’t come cheap and although
the trust is trading at a small
discount, it has hefty ongoing
charges of 2.11 per cent.
FACT BOX
MANAGER: Brevan Howard Capital Management / LAUNCHED: 14/03/2007 / PREMIUM/
FE TRUSTNET
FE CROWN RATING
N/A
PERFORMANCE OF TRUST VS SECTOR
AND INDEX YEAR-TO-DATE
IT Hedge Funds Brevan Howard Capital Management MSCI AC World
(4.09%) - BH Macro (29.90%) (1.69%)
30%
25%
20%
15%
10%
5%
0%
-5%
-10%
foreign exchange trades. It therefore
feeds off volatility, meaning the
extended period of market stability
in the run-up to 2018 acted as a
headwind. This all changed this year,
however, with the unpredictable
conditions helping to push the trust
up by 27.41 per cent, compared with
gains of 1.17 per cent from the MSCI
All Countries World index.
Take May 2018, for example. The
trust was short Italian bonds heading
into the general election on the
expectation that extremist parties
would make better gains than those
in France and Germany had done
last year.
In that month alone, the portfolio
saw its net asset value climb by
nearly 9 per cent.
The trust also did extremely well
during the global financial crisis,
returning more than 20 per cent in
C
onventional wisdom would
suggest you increase your
exposure to bonds at the de-
risking stage of your retirement.
However, with yields low and likely
to rise, this option currently looks
unappealing.
One alternative for reducing risk
in your portfolio is BH Macro, a
trust that Peter Hewitt is using as a
diversifier against the more growth-
orientated names in F&C Managed
Portfolio Trust Growth.
BH Macro is fully invested in the
Brevan Howard master fund which is
a macro-style hedge fund.
While the trust has disappointed
over large parts of the last decade
– from 2010 to 2018 it returned just
43.03 per cent, for example – it does
offer genuine diversification.
It does not invest in equities but
instead makes interest rate and
DISCOUNT: -3.5% / OCF: 2.11%
Source: FE Analytics
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