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Company BH Global Limited
TIDM BHGG
Headline

Monthly Shareholder Report

Released 14:11 02-Apr-2013
Number 3526B14

RNS Number : 3526B
BH Global Limited
02 April 2013
 




 

 

 

 

 

 

BH GLOBAL LIMITED

BH GLOBAL LIMITED

MONTHLY SHAREHOLDER REPORT
FEBRUARY 2013

ADV04163 CONFIDENTIAL DO NOT COPY OR DISTRIBUTE

Your attention is drawn to the disclaimer at the beginning and end of this document
© Brevan Howard (2013). All Rights Reserved.


 

Important Legal Information and Disclaimer

BH Global Limited ("BHG") is a feeder fund to Brevan Howard Global Opportunities Master Fund Limited (together "the Funds"), which invests in a range of funds of which one or more of the Brevan Howard group of affiliated entities is the manager or investment manager (the "Underlying Funds"). Brevan Howard Asset Management LLP ("BHAM") and Brevan Howard Capital Management LP (together with BHAM, "Brevan Howard") have supplied the information herein regarding the Funds' performance and outlook. BHAM is authorised and regulated by the Financial Services Authority (the "FSA") in the United Kingdom.

This material constitutes a financial promotion for the purposes of the Financial Services and Markets Act 2000 and the handbook of rules and guidance issued from time to time by the FSA (the "FSA Rules").

The material relating to the Funds and the Underlying Funds included in this report has been prepared by Brevan Howard and is provided for information purposes only and does not constitute an invitation or offer to subscribe for or purchase shares in the Funds or the Underlying Funds. This material is not intended to provide a sufficient basis on which to make an investment decision. Information and opinions presented in this material relating to the Funds and the Underlying Funds have been obtained or derived from sources believed by Brevan Howard to be reliable, but Brevan Howard makes no representation as to their accuracy or completeness. Estimated results, performance or achievements may materially differ from any actual results, performance or achievements. Except as required by applicable law, the Funds and Brevan Howard expressly disclaim any obligations to update or revise such estimates to reflect any change in expectations, new information, subsequent events or otherwise. All investments are subject to risk. Prospective investors are advised to seek expert legal, financial, tax and other professional advice before making any investment decisions.

Tax treatment depends on the individual circumstances of each investor in BHG and may be subject to change in the future. Returns may increase or decrease as a result of currency fluctuations.

You should note that, if you invest in BHG, your capital will be at risk and you may therefore lose some or all of any amount that you choose to invest. This material is not intended to constitute, and should not be construed as, investment advice. Potential investors in BHG should seek their own independent financial advice. BHAM neither provides investment advice to, nor receives and transmits orders from, investors in BHG nor does it carry on any other activities with or for such investors that constitute "MiFID or equivalent third country business" for the purposes of the FSA Rules.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE RESULTS

 


BH Global Limited

Manager:

Brevan Howard Capital Management LP ("BHCM")

Administrator:

Northern Trust International Fund Administration Services (Guernsey) Limited ("Northern Trust")

Corporate Broker:

J.P. Morgan Securities Ltd.

Listings:

London Stock Exchange

(Premium Listing)

NASDAQ Dubai - USD Class (Secondary Listing)

Bermuda Stock Exchange (Secondary Listing)

Overview:

BH Global Limited ("BHG") is a closed-ended investment company, registered and incorporated in Guernsey on 25 February 2008 (Registration Number: 48555).

BHG invests all of its assets (net of short-term working capital) in the ordinary shares of Brevan Howard Global Opportunities Master Fund Limited ("BHGO").

BHGO invests all of its assets, net of cash retained for short-term working capital and efficient portfolio management, in investment funds of which one or more of the Brevan Howard group of affiliated entities is the manager or investment manager (the "Underlying Funds").

BHG was admitted to the Official List of the UK Listing Authority and to trading on the Main Market of the London Stock Exchange on 29 May 2008.

 

 

Total Assets: $998 mm1

1. As at 28 February 2013 by BHG's administrator, Northern Trust.


Summary Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


ASC 820 Asset Valuation Categorisation*

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Fund Update

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fund Performance Review

 

 

 


BH Global Limited NAV per share

Shares Class

NAV (USD mm)

NAV per Share

USD Shares

172.6

$13.12

EUR Shares

39.5

€13.24

GBP Shares

785.7

£13.29

As at 28 February 2013.



BH Global Limited NAV per Share* % Monthly Change

USD

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

YTD

2008

-

1.16*

0.10

0.05 

-3.89 

1.13 

2.74 

0.38 

1.55

2009

3.35

1.86

1.16

1.06

2.79

-0.21

1.07

0.27

1.49

0.54

0.11

0.04

14.31

2010

0.32

-0.85

-0.35

0.53

-0.06

0.60

-0.79

0.80

1.23

0.39

-0.21

-0.06

1.54

2011

0.09

0.42

0.34

1.20

0.19

-0.56

1.61

3.51

-1.29

-0.14

0.19

-0.88

4.69

2012

1.22

1.02

-0.54

-0.10

-0.65

-1.53

1.46

0.70

1.47

-0.72

0.81

1.26

4.44

2013

1.33

0.49**











1.83**

 

EUR

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

YTD

2008

1.28*

0.25

0.29 

-4.34 

1.15 

3.01 

0.44 

1.93

2009

3.57

1.94

1.13

1.05

2.54

-0.21

1.11

0.27

1.50

0.50

0.08

0.08

14.36

2010

0.37

-0.90

-0.35

0.58

-0.02

0.69

-0.81

0.86

1.06

0.36

-0.14

0.04

1.73

2011

0.06

0.43

0.35

1.30

0.27

-0.63

1.78

3.77

-1.44

-0.14

0.19

-0.91

5.04

2012

1.21

1.01

-0.56

-0.12

-0.61

-1.45

1.45

0.63

1.40

-0.76

0.98

1.13

4.35

2013

1.25

0.58**











1.84**

 

GBP

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

YTD

2008

1.40*

0.33

0.40 

-4.17 

1.25 

3.27 

0.41 

2.76

2009

3.52

1.94

1.03

0.68

2.85

-0.28

1.05

0.31

1.51

0.58

0.12

0.08

14.15

2010

0.35

-0.93

-0.32

0.58

-0.04

0.62

-0.81

0.84

1.17

0.37

-0.20

-0.03

1.61

2011

0.10

0.41

0.38

1.13

0.04

-0.59

1.69

3.67

-1.41

-0.15

0.21

-0.84

4.65

2012

1.23

1.05

-0.51

-0.08

-0.62

-1.51

1.50

0.70

1.44

-0.72

0.72

1.31

4.55

2013

1.36

0.56**











1.93**

 


Source: Underlying NAV data for the funds in which BHGO invests in is provided by their respective administrators. BHG NAV and NAV per Share data is provided by BHG's administrator, Northern Trust. BHG NAV per Share % Monthly Change calculations are made by BHAM.

BHG NAV data is unaudited and net of all investment management fees and all other fees and expenses payable by BHG. NAV performance is provided for information purposes only. Shares in BHG do not necessarily trade at a price equal to the prevailing NAV per Share. 

* Performance is calculated from a base NAV per Share of 10 in each currency. The opening NAV in May 2008 was 9.9 (after deduction of the IPO costs borne by BHG).

** Data as at 28 February 2013.

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS

 

BH Global Limited

Unaudited Estimates as at 28 February 2013


% of Gross Market Value*

Level 1

63

Level 2

37

Level 3

0

             



 

Source: BHAM

* These estimates reflect the combined ASC 820 levels of the Underlying Funds, proportional to each of the Underlying Fund's weighting in BHGO's portfolio. The estimates are unaudited and have been calculated by Brevan Howard using the same methodology as that used in the most recent audited financial statements of Underlying Funds. The relative size of each category is subject to change.

Level 1: this represents the level of assets in the portfolio which are priced using unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: this represents the level of assets in the portfolio which are priced using either (i) quoted prices that are identical or similar in markets that are not active or (ii) model-derived valuations for which all significant inputs are observable, either directly or indirectly in active markets;

Level 3: this represents the level of assets in the portfolio which are priced or valued using inputs that are both significant to the fair value measurement and are not observable directly or indirectly in an active market.

 

 

Allocations of BHGO as at 28 February 2013* (allocations are subject to change):

Investment

Allocation*

(% NAV)

Brevan Howard Master Fund Limited ("BHMF")

44.9

Brevan Howard Asia Master Fund Limited ("BHA")

8.6

Brevan Howard Emerging Markets Strategies Master Fund Limited ("BHEMS")

9.1

Brevan Howard Credit Catalysts Master Fund Limited ("BHCC")

13.0

Brevan Howard Commodities Strategies Master Fund Limited ("BHCS")

4.8

Brevan Howard Systematic Trading Master Fund Limited ("BHST")

10.0

Brevan Howard Investment Fund - Emerging Markets Local Fixed Income Fund ("BHEML")

4.4

Brevan Howard Investment Fund II - Macro FX Fund ("BHMFX")

2.9

Brevan Howard Credit Value Master Fund Limited ("BHCV")

1.8

Cash/Other

0.5

 

Source: Brevan Howard; figures rounded to one decimal place.

* Inclusive of subscriptions\redemptions in Underlying Funds for 28 February 2013.

 

 

 

 

 

 

 

Exposures of BHGO by asset class as at 28 February 2013 (allocations are subject to change):

Asset Class

VaR** by asset class as a % of total VaR

Fixed Income

26

Vega

9

Equity

23

Credit

15

FX

20

Commodity

8

 

** Calculated using historical simulation based on a 1 day, 95% confidence interval.

Source: Brevan Howard; figures rounded to the nearest whole number.

 

 

 

Monthly, quarterly and annual contribution (%) to the performance of BHG USD Shares (net of fees and expenses) by strategy group


Macro

Rates

FX

EMG

Equity

Commodity

Credit

Systematic

TOTAL

February

0.64

0.28

0.03

-0.13

0.01

-0.16

0.05

-0.23

0.49

QTD

1.06

0.09

0.05

0.13

0.03

0.02

0.39

0.06

1.83

2013 YTD

1.06

0.09

0.05

0.13

0.03

0.02

0.39

0.06

1.83

Monthly, quarterly and annual figures are calculated by Brevan Howard as at 28 February 2013, based on performance data for each period provided by BHG's administrator, Northern Trust. Figures rounded to two decimal places.

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS

Methodology and Definition of Monthly Contribution to Performance:

Attribution is approximate and has been derived by allocating each underlying trader book in each Underlying Fund to a single category. In cases where a trader book has activity in more than one category, the most relevant category has been selected.

 

The above strategies are categorised as follows:

"Macro": multi-asset global markets, mainly directional (for BHG, the majority of risk in this category is in rates)

"Rates": developed interest rates markets

"FX": global FX forwards and options

"EMG": global emerging markets

"Equity": global equity markets including indices and other derivatives

"Commodity": liquid commodity futures and options

"Credit": corporate and asset-backed indices, bonds and CDS

"Systematic": rules-based futures trading

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Market Review and Outlook

 

 

 

 

 

 

 

 

 

 

 

 

 

Monthly Performance of Underlying Funds

Investment

MTD performance (%)
(As at

28 February 2013)

Brevan Howard Master Fund Limited Class Y (USD)*

2.17

Brevan Howard Asia Master Fund Limited Class X (USD)*

0.31

Brevan Howard Emerging Markets Strategies Master Fund Limited Class X (USD)*

-1.73

Brevan Howard Credit Catalysts Master Fund Limited Class Y (USD)*

0.26

Brevan Howard Commodities Strategies Master Fund Limited Class X (USD)*

-2.28

Brevan Howard Systematic Trading Master Fund Limited Class B (USD)*

-2.06

Brevan Howard Investment Fund - Emerging Markets Local Fixed Income Fund Class A (USD)*

0.39

Brevan Howard Investment Fund II - Macro FX Fund Class A (USD) *

-0.10

Brevan Howard Credit Value Fund Master Fund Class Y (USD)*

0.98

* The USD currency class of each Underlying Fund is used as a proxy for the performance of each of the Underlying Funds; BHG also invests in the EUR and GBP currency classes of the Underlying Funds.

Source: Month-to-date ("MTD") performance data for the Underlying Funds is provided by their respective administrators. MTD performance data is net of all investment management fees and all other fees and expenses payable. 

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS

The performance for BHG was positive in February; the EUR shares appreciated by 0.58% and the GBP and USD share classes appreciated by 0.56% and 0.49% respectively.

During the month, there were positive returns from BHMF, BHCV, BHEML, BHA and BHCC as detailed below. The other Underlying Funds in the portfolio detracted from performance.

In February, the Investment Committee made modest changes to the target portfolio to reduce the allocation to BHMF, thereby increasing BHG's diversification. These changes will become apparent over the coming months as redemptions in the Underlying Funds are reinvested in their new allocations.

 

Brevan Howard Master Fund Limited ("BHMF")

The NAV per share of BHMF Class Y USD Shares appreciated by 2.17% (net of fees) in February.

During the month, BHMF generated gains mainly in directional positions in European rates and in macro FX trading. Further gains were made in macro equity trading and in curve positions in European rates. Very small losses were incurred in interest rates volatility trading and commodity trading.

 

Brevan Howard Asia Master Fund Limited ("BHA")

The NAV per share of BHA Class X USD Shares appreciated by 0.31% (net of fees) in February.

During February, BHA generated gains in FX trading and US dollar/Hong Kong dollar interest rates trading strategies. Gains were also made in Australian dollar and EUR interest rate trading. These gains were partially offset by losses incurred in Japanese yen interest rate trading.

 

Brevan Howard Emerging Markets Strategies Master Fund Limited ("BHEMS")

The NAV per Share of BHEMS Class X USD Shares depreciated by 1.73% (net of fees) in February.

During February, BHEMS incurred losses across local rates, FX, equities and credit strategies. These losses were marginally offset by gains in macro overlay strategies.

 

Brevan Howard Credit Catalysts Master Fund Limited ("BHCC")

The NAV per Share of BHCC Class Y USD Shares appreciated by 0.26% (net of fees) in February.

BHCC generated gains from MBS/ABS strategies and losses in corporate credit strategies.

 

Brevan Howard Commodities Strategies Master Fund Limited ("BHCS")

The NAV per Share of BHCS Class X USD Shares depreciated by 2.28% (net of fees) in February.

During the month, BHCS incurred losses across all strategies.

 

Brevan Howard Systematic Trading Master Fund Limited ("BHST")

The NAV per Share of BHST Class B USD Shares depreciated by 2.06% (net of fees) in February.

During the month, BHST generated gains in all strategies with the exception of fixed income and metal strategies which both incurred losses.

 

Brevan Howard Investment Fund - Emerging Markets Local Fixed Income Fund ("BHEML")

The NAV per Share of BHEML Class A USD Shares appreciated by 0.39% (net of fees) in February.

During February gains were made from long positions in rates markets; short positions in rates had less impact and were increased slightly. The net impact of emerging market currencies was limited as profits offset losses; long EM currency positions were decreased slightly and short positions increased.

 

Brevan Howard Investment Fund II - Macro FX Fund ("BHMFX")

The NAV per Share of BHMFX Class A USD Shares depreciated by 0.10% (net of fees) in February.

Profits made early in the month being long risk positive currencies against short positions in major currencies were reversed in risk aversion towards the end of the month.

 

Brevan Howard Credit Value Master Fund Limited ("BHCV")

The NAV per Share of BHCV Class Y USD Shares appreciated by 0.98% (net of fees) in February.

BHCV generated broad-based gains from most strategies in February. Long MBS positions, with the exception of a couple of CMBS positions, continued to move higher. BHCV made strong gains from its corporate credit positions across structured tranches and distressed bank loans. While corporate positions represent approximately 30% of the portfolio, they produced more than half of the gains during February.

 

Market Commentary

US

Fiscal policy continues to be the major force shaping US macroeconomic developments. The sequester - mandatory across-the-board spending cuts - requires federal government agencies to cut $85 billion from the budget between now and October. According to the Congressional Budget Office's estimate, the sequester will shave 0.6 percentage points from real GDP growth during calendar year 2013.  Combined with the fiscal drag from increased payroll taxes as well as increased income tax rates on high-income households, the total fiscal drag this year is expected to be at least 1.5 percentage points. Due to the magnitude of this drag, the economy is unlikely to grow by more than 2% this year. 

Financial markets seem unperturbed by the prospect of another year of below-trend growth. Indeed, stocks shrugged off the bad news and moved up on a net basis after a week of volatility at the end of February. A number of explanations may account for this behaviour. First, markets may have to see the hit to growth before they believe it. Second, markets may expect that the sequester will be softened in a few weeks if public opinion coerces the political parties to compromise, which is certainly a possibility. Finally, markets may figure that monetary policy may be sufficient to offset the fiscal drag.

In that regard, Chairman Bernanke's semi-annual Humphrey-Hawkins testimony on 26 February as well as an important policy speech on low long-term interest rates firmly demonstrated the Fed's commitment to ultra easy monetary policy. Bernanke explicitly rebutted concerns that excessive risk-taking in some financial markets would lead the Fed to prematurely dial back QE3. The Fed gave a green light to investors by essentially saying the Bernanke 'put' is struck at the money. 

The Fed is delivering easy monetary policy because the economy is too weak to grow on its own. Even with a commitment to keep rates low until the unemployment rate is below 6.5% (so long as the inflation forecast is below 2.5%) and $85 billion per month in Treasury and MBS purchases, the unemployment rate edged back up to 7.9% in the latest release and core inflation has been below the Fed's 2% target for more than four consecutive years. In face of additional fiscal drag, the Fed's aggressive stance is warranted to achieve its dual mandate. 

At the same time, renewed vigour in certain parts of the economy promises that above-trend growth will eventually materialise. Housing is improving across the board, households are steadily repairing their balance sheets, and payroll employment as well as manufacturing output has rebounded from a swoon last year. As we put the worst of the fiscal drag behind us and shocks from the external sector hopefully fade, the underlying positives in the private sector should drive growth above trend by the end of the year.

 

EMU

In the Italian general elections, the risk scenario of a hung parliament materialised, leaving Bersani's centre-left with a majority in the Chamber but without a majority in the Senate as Monti's bloc performed poorly, while Grillo's Five Star Movement and Berlusconi's PDL exceeded expectations. Government negotiations are expected to be tedious and the risk of new elections remains high, adding to the overall economic uncertainty characterising the entire eurozone.

Having hit a peak in January 2013, the composite eurozone PMI showed a drop in February. The aggregate eurozone figures, still clearly below the 50 mark, mask a growing discrepancy between Germany and the rest of the eurozone. Although the European Commission's Economic Sentiment Indicator surprised to the upside, this survey tends to lag. Crucially, the eurozone unemployment rate reached a record high of 11.9% in January, up from 11.8% in December, rising in most countries in the EMU, with the exceptions of Germany, Belgium and Ireland. Greece continues to have the highest unemployment rate in the EMU at 27.0% in November and rising. In Spain, the unemployment rate stood at 26.2% in January (up from 26.1% in December), in Portugal at 17.6% (up from 17.3%), in Ireland at 14.7% (unchanged) and in Cyprus also at 14.7 (up from 14.6%). Italy saw a jump in its unemployment rate to 11.7% in January from 11.3% in December, while the unemployment rate in France continued to climb, to 10.6% in January from 10.5% in December. Inflation continues to fall: according to Eurostat's flash estimates, eurozone HICP inflation declined to 1.8% y/y in February from 2.0% y/y in January. This was the first time since November 2010 that the headline inflation rate in the eurozone fell below 2.0% y/y. All the factors that previously supported inflation, at least temporarily, seem to be fading. In the absence of upward pressures, inflation is expected to trend even lower in the coming months.

Credit extension to the private sector remains impaired in most of the eurozone. While the annual growth rate of broad money supply M3 rose to 3.5% y/y in January, including increased deposit creation in both the core and the periphery, with the exceptions of Portugal and Cyprus, the overall inflow of deposits so far has not led to a pick-up in lending to the real economy. Indeed, lending to the private sector (adjusted for loans and securitisation) decelerated 0.4% y/y in January. Lending to non-financial corporations declined at an even faster pace of -1.5% y/y in January, after -1.3% y/y in December. Instead of extending new loans, eurozone banks bought government bonds to the tune of €33bn. In its March meeting, the ECB decided to leave interest rates unchanged, despite worse macroeconomic projections and the acknowledgment that bank lending was still highly fragmented across the eurozone and credit is difficult to obtain for companies in some countries.

 

UK

The data flow continued to show further disappointment, softened in part by some improved housing data and services surveys.  Absent volatile factors, we estimate that underlying growth was slightly above zero. We broadly expect this pace for the rest of the year.

While we do not believe that this is a triple dip in any economic sense of the word, activity remains extremely subdued by the standards of previous recoveries. The three key headwinds in 2013 are most likely to remain the same as those that prevailed in 2012: real wage growth remains negative, fiscal austerity continues, and the desired export-led recovery continues to be undermined by weakness in eurozone growth, itself undermined by the eurozone's own fiscal austerity and political uncertainties. The UK's growth performance is expected to remain somewhere between the US (growth a bit below trend) and the eurozone (recession).

There has been good progress in the transmission of the Funding for Lending Scheme ("FLS") in the sense that bank funding costs have fallen and banks have eased credit conditions. There are also some signs of improvement in unsecured bank lending to households (actually rising) and bank lending to corporates (falling less quickly). However new mortgage lending remains close to zero.

The medium-term inflation outlook remains benign, in the sense that there is no runaway inflation problem. Core CPI remains surprisingly resilient above 2%, despite the economy's weakness. However, the downward pressure from spare capacity on prices is clear in the labour market, where wage inflation has actually fallen further below an already low 2%.

Our growth and inflation forecasts imply that the Bank of England ("BoE") will continue to be faced with the dilemma of growth that is well below trend while inflation remains somewhat resilient above the target. However, the BoE has made it clear that continued overshoots of inflation relative to target are not a constraint on further monetary stimulus. In February, three MPC members, including Governor King, voted for additional QE, and it would likely take only a nudge in the data to change the minds of some of the others. There has also been renewed talk of additional credit easing, although there are no details about which assets would be purchased or whether the government or the BoE would do the purchasing. The increase in inflation tolerance looks set to continue when Carney takes over as BoE governor in July. Carney has let it be known that he favours monetary activism, despite overshoots in the inflation target, until economic growth has reached "escape velocity". He also appears to be willing to communicate more explicitly about the future path of interest rates and the magnitude and time horizon over which inflation overshoots will be tolerated. Carney does not vigorously support, but also does not want to rule out, a temporary move to nominal GDP targeting.

At the March Budget, the government appeared to support further monetary activism by tweaking the BoE's remit to allow for longer time horizons for inflation to return to target and indicating they are looking into possible extensions of the FLS. They continued with the mantra of "sticking with the austerity plan" and largely blamed a downward revision to growth on "EMU and global factors". The loss of the AAA sovereign rating, which we warned specifically in recent months, was not a major market event, although it imposed some political cost on the coalition government.

 

Japan

Abenomics remained on track in February.  Japan succeeded in averting censure at the 14-15 February G20 meetings in Moscow and Abe received an endorsement of his economic policies during his summit with Obama the following weekend in Washington.  Together, the two events gave Japan the green light to continue aggressive monetary easing, with the tendency to drive the yen lower.  On structural reforms, the US also agreed to sign a memorandum with Japan regarding Japan's entry into the Trans-Pacific Partnership ("TPP") free trade negotiations, which gave Abe space to enter the talks without making an a priori commitment to eliminate all tariffs, which would risk alienating important political constituents.  Abe is making a public case to join the TPP, arguing it would add 0.5% to GDP growth and compel the economy to become more competitive.

The Abe administration succeeded in pushing its ¥13tn supplementary budget through the Diet, of which more than ¥5tn is a public works program aimed at increasing real GDP growth by 2% in FY 2013 and creating 600,000 jobs. However, labour shortages and soaring construction material prices are two major hurdles to quickly implementing the numerous public works projects, underscoring the structural constraints to a quick turnaround for Japan's economy.  

The yen fluctuated around the 92-94 level versus the US dollar for most of February, following strong gains in December and January while the Nikkei continued to rally, rising by over 3% in the month.  FX markets are waiting for more decisive policies from the Bank of Japan ("BoJ"), which should come after the new leadership holds its first meeting on 3-4 April.  Kuroda and two deputy candidates all advocate bolder monetary easing but policy changes will require the support of a majority of the BoJ's Board of Governors.

Economic indicators are showing more signs of a recovery. The Markit manufacturing PMI continued to rise to 48.5 in February from 47.7 in January, and monthly average wages rose in January for the first time in nine months. However, industrial production in January was weaker than market forecasts and the trade deficit persisted according to the first 10 days provisional data in February. Public opinion of the Abe administration is off to the best start of any new administration in the post-Kuizumi era, as approval ratings continue to soar to new highs according to various surveys. However critical challenges remain in the context of European risks and territorial disputes as well as the intrinsic structural deficiencies of Japan's economy which cannot be reversed.

 

China

China's PMIs weakened across the board in February, after strengthening for five consecutive months. While the Chinese New Year may have contributed to the lower PMI, it is unlikely to be the sole explanation. Likely, the growth momentum has moderated compared with the last quarter of 2012, although we will only know with certainty in March. CPI rebounded sharply to over 3.0% y/y in February, on the back of an unfavourable base effect, while PPI dynamics remained in deflationary territory. Property prices continue to surge, increasing by 0.8% m/m in February and compounding the 1.0% m/m rise recorded in January.

The People's Bank of China continued withdrawing liquidity in open market operations both in January and February in order to sterilise the excessive liquidity caused by surging capital inflows. Monetary policy is poised to stay neutral (i.e. neither cuts, nor hikes in either official rates or the required reserve ratio) in the first half of the year. Chinese policymakers presented their 2013 macroeconomic targets: GDP growth at 7.5%, as in 2012; CPI inflation at 3.5% y/y, below the 2012 target; M2 expansion at 13.0% y/y, also below the 2012 target; fiscal budget deficit target at 2% of GDP, higher than the 1.5% set in 2012. Those targets reflect the government policy stance: prudent monetary policy and proactive fiscal policy. The State Council announced measures to curb property price inflation, mainly focusing on increase supply and curbing speculative demand in cities with excessive property price rises.

 

Enquiries

Northern Trust International Fund Administration Services (Guernsey) Limited

Harry Rouillard +44 (0) 1481 74 5315



 

Risk Factors

Acquiring shares in BHG may expose an investor to a significant risk of losing all of the amount invested. Any person who is in any doubt about investing in BHG (and therefore the Underlying Funds) should consult an authorised person specialising in advising on such investments. Any person subscribing for shares in BHG must be able to bear the risks involved. These include, among others detailed in BHG's Prospectus, the following:

• The Underlying Funds are speculative and involve substantial risk.

• The Underlying Funds will be leveraged and will engage in speculative investment practices that may increase the risk of investment loss. The Underlying Funds may invest in illiquid securities.

• Past results of each Underlying Fund's investment manager(s) are not necessarily indicative of future performance of that Underlying Fund, and that Underlying Fund's performance may be volatile.

• An investor could lose all or a substantial amount of his or her investment.

• An investment manager may have total investment and trading authority over an Underlying Fund and each Underlying Fund is dependent upon the services of its investment manager(s).

• Investments in the Underlying Funds are subject to restrictions on withdrawal or redemption and should be considered illiquid. There is no secondary market for investors' interests in the Underlying Funds and none is expected to develop.

• There are restrictions on transferring interests in the Underlying Funds.

• The investment managers' incentive compensation, fees and expenses may offset an Underlying Fund's trading and investment profits.

• Each Underlying Fund is not required to provide periodic pricing or valuation information to investors with respect to individual investments.

• The Underlying Funds are not subject to the same regulatory requirements as mutual funds.

• A portion of the trades executed for the Underlying Funds may take place on foreign markets.

• The Underlying Funds are subject to conflicts of interest.

• Each Underlying Fund is dependent on the services of certain key personnel, and, were certain or all of them to become unavailable, an Underlying Fund may prematurely terminate.

• Each Underlying Fund's managers will receive performance-based compensation. Such compensation may give such managers an incentive to make riskier investments than they otherwise would.

• An Underlying Fund may make investments in securities of issuers in emerging markets. Investment in emerging markets involve particular risks, such as less strict market regulation, increased likelihood of severe inflation, unstable currencies, war, expropriation of property, limitations on foreign investments, increased market volatility, less favourable or unstable tax provisions, illiquid markets and social and political upheaval.

The above summary risk factors do not purport to be a complete description of the relevant risks of an investment in shares in BHG and therefore reference should be had to BHG's Prospectus and related offering documentation for a complete description of these and other relevant risks. 

 

 


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