Regulatory Story
Go to market news section View chart   Print
BH Credit Catalysts  -  BHCG   

Monthly Shareholder Report - June 2014

Released 18:05 31-Jul-2014

Monthly Shareholder Report - June 2014


BH Credit Catalysts Limited                Overview
Manager:                                   BH Credit Catalysts Limited ("BHCC") is a closed-ended investment company,
                                           registered and incorporated in Guernsey on 19 October 2010 (Registration
Brevan Howard Capital Management LP        Number: 52520).
                                           BHCC invests all of its assets (net of short-term working capital) in the
Administrator:                             ordinary shares of Brevan Howard Credit Catalysts Master Fund Limited (the
                                           "Fund").The investment manager of the Fund is DW Investment Management, LP
Northern Trust International Fund          ("DWIM").
Administration Services (Guernsey) Limited
("Northern Trust")                         BHCC was admitted to the Official List of the UK Listing Authority and to
                                           trading on the Main Market of the London Stock Exchange on 14 December 2010.
Corporate Brokers:
J.P. Morgan Securities Ltd
                                           Total Assets
Dexion Capital Plc
                                           $241 mm1
                                           1. As at 30 June 2014 by BHCC's administrator, Northern Trust.
London Stock Exchange(Premium Listing)
Summary Information
                                           BH Credit Catalysts Limited NAV per Share (as at 30 June 2014)
                                           Share Class NAV (USD mm) NAV per Share
                                           USD Shares         54.9         $13.92
                                           GBP Shares        185.7         £13.97
                                           BH Credit Catalysts Limited NAV per Share % Monthly Change
                                           USD  Jan  Feb  Mar  Apr  May   Jun   Jul  Aug   Sep   Oct   Nov   Dec   YTD
                                           2011 1.78 1.55 0.91 2.14 -0.03 -2.16 0.50 -0.37 -0.96 -0.50 -1.49 -0.50 0.81
                                           2012 0.64 1.15 2.36 1.51 1.17  -0.10 1.38 1.39  1.65  0.80  0.73  1.26 14.83
                                           2013 1.73 0.24 1.19 1.07 1.74  -0.52 0.16 1.07  1.18  1.68  1.70  1.52 13.50
                                           2014 1.07 1.43 0.49 1.51 0.85   1.47                                    7.01
                                           GBP  Jan  Feb  Mar  Apr  May   Jun   Jul  Aug   Sep   Oct   Nov   Dec   YTD
                                           2011 1.74 1.54 0.95 2.08 0.05 -2.16 0.51 -0.33 -0.93 -0.50 -1.49 -0.47  0.89
                                           2012 0.64 1.15 2.40 1.50 1.22 -0.06 1.40 1.36  1.62  0.81  0.75  1.26  14.95
                                           2013 1.76 0.27 1.20 1.05 1.81 -0.52 0.18 1.06  1.13  1.71  1.68  1.54  13.62
                                           2014 1.08 1.43 0.53 1.51 0.88  1.48                                     7.11
                                           Source: Fund data is provided by the administrator of the Fund, International
                                           Fund Services (Ireland) Limited. BHCC NAV and NAV per Share data is provided
                                           by BHCC's administrator, Northern Trust. BHCC NAV per Share % Monthly Change
                                           is calculated by BHCM. BHCC NAV data is unaudited and net of all investment
                                           management fees (2% annual management fee and 20% performance fee) and all
                                           other fees and expenses payable by BHCC.
                                           NAV performance is provided for information purposes only. Shares in BHCC do
                                           not necessarily trade at a price equal to the prevailing NAV per Share.
                                           PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS

ASC 820 Asset Valuation Categorisation*    Brevan Howard Credit Catalysts Master Fund Limited
                                           Unaudited Estimates as at 30 June 2014
                                                   % of Gross Market Value*
                                           Level 1                       55
                                           Level 2                       41
                                           Level 3                        4
                                           Source: BHCM
                                           * These estimates are unaudited and have been calculated by BHCM using the
                                           same methodology as that used in the most recent audited financial statements
                                           of the Fund. These estimates are 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
                                           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

Performance Review for the Fund            The information in this section has been provided to BHCC by DWIM.
                                           The NAV per share of BHCC USD Shares appreciated by 1.47% (net of fees and
                                           expenses) in June, with corporate investments generating just under half of
                                           gains while mortgage and asset-backed strategies contributed the remainder of
                                           In the corporate portfolio, each of the three sub-strategies generated
                                           positive returns for the month. Performing long/short positions were once
                                           again the largest contributor for June, accounting for over 80% of overall
                                           corporate strategy returns. The remaining 20% of the corporate returns were
                                           fairly evenly distributed between distressed and corporate structured trades,
                                           with a slightly higher contribution from distressed positions.
                                           June performance in the long/short strategy was driven by modest gains across
                                           a large number of the Fund's fundamental positions, with overall winners
                                           outnumbering losers by approximately 1.7 to 1. The largest positive
                                           contributors to the long/short portfolio for the month were positions in
                                           Anadarko Petroleum, where the Fund holds a long-biased bond position, and
                                           Caesars, where the Fund holds a number of positions both long and short.
                                           In the Fund's distressed strategy, performance was driven largely by
                                           long-biased holdings in TXU. In the corporate structured portfolio, June
                                           performance echoed that of May, where bespoke synthetic CDO equity positions
                                           drove positive returns, overcoming smaller losses in the index tranche
                                           Overall for the second quarter, performing long/short holdings were the
                                           largest contributors to corporate returns, accounting for nearly 70% of
                                           profits in the corporate portfolio. The remainder of second quarter corporate
                                           returns were generated in nearly equal size by distressed and corporate
                                           structured positions.
                                           Within the mortgage- and asset-backed portfolio, the largest positive
                                           contributions for June were derived from US residential mortgage-backed
                                           investments, followed by European mortgage- and asset-backed positions and US
                                           CMBS. Representation and warranty settlement related trades continued to do
                                           well and fundamentals remain supportive for RMBS. Commercial mortgage-backed
                                           positions contributed both as a result of overall market tightening as well
                                           as idiosyncratic bond- and property-specific situations.
                                           For the second quarter as a whole, US residential mortgage-backed investments
                                           made the most significant contribution to the mortgage and asset-backed
                                           performance, followed by monoline related trades and commercial
                                           mortgage-backed holdings.

Investment Manager's Market Review and     The information in this section has been provided to BHCC by DWIM.
                                           June was a constructive month for risk assets, particularly US equities,
                                           where the S&P 500 index gained over 2% for the month. US credit spreads were
                                           fairly range-bound, but still printed positive returns overall for June in
                                           both investment grade (CDX IG moved from L+62bp at the end of May to L+58bp
                                           on 30 June) and high yield (CDX HY moved from L+313bp to L+303bp). Investment
                                           grade credit - BBB credits in particular - and leveraged loans performed the
                                           best, benefitting from flat to tighter spreads and curve flattening over the
                                           month. In Europe, stocks were down slightly but credit performance was
                                           positive, in-line with the gains seen in US spreads.
                                           In June, corporate activity continued to contribute positively to market
                                           sentiment and momentum. While monthly announced M&A volumes declined from the
                                           elevated levels seen in April and May, transaction volumes were still well
                                           above recent 12 and 24 month averages.
                                           In corporate credit markets, June primary issuance remained strong for US
                                           credit generally and for European investment grade bonds, but away from
                                           investment grade European new issuance was quieter. In terms of fund flows,
                                           June was fairly mixed. There were mid-month outflows from investment grade
                                           and high yield bond funds, but this quickly reversed by the end of the month.
                                           For leveraged loan funds, outflows seen in previous months continued in June,
                                           and if this pace continues leveraged loan funds could be showing year-to-date
                                           outflows by some point in the third quarter. Despite these retail outflows,
                                           leveraged loans continued to post solid returns in June.
                                           In mortgage- and asset-backed markets, prices for non-agency, credit
                                           sensitive residential mortgage bonds improved somewhat over the month of
                                           June, as a result of positive supply/demand dynamics and perceived
                                           progression in rep and warranty settlement negotiations. In commercial
                                           mortgage-backed securities, June saw a large balance of vintage loans move
                                           into special servicing (assets moved over at approximately double the average
                                           rate seen in the last six months), although the majority of these transfers
                                           were well telegraphed and appear to be proactive steps to manage balloon

Enquiries                                  Northern Trust International Fund Administration Services (Guernsey) Limited
                                           Harry Rouillard +44 (0) 1481 74 5315

Important Legal Information and Disclaimer

BH Credit Catalysts Limited ("BHCC") is a feeder fund investing in Brevan
Howard Credit Catalysts Master Fund Limited (the "Fund"). Brevan Howard
Capital Management LP ("BHCM") and DW Investment Management, LP ("DWIM") have
supplied certain information herein regarding BHCC's and the Fund's
performance and outlook.

The material relating to BHCC and the Fund included in this report is provided
for information purposes only, does not constitute an invitation or offer to
subscribe for or purchase shares in BHCC or the Fund and is not intended to
constitute "marketing" of either BHCC or the Fund as such term is understood
for the purposes of the Alternative Investment Fund Managers Directive as it
has been implemented in states of the European Economic Area. 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 BHCC
and the Fund have been obtained or derived from sources believed to be
reliable, but none of BHCC, the Fund, BHCM or DWIM make any representation as
to their accuracy or completeness. Any estimates may be subject to error and
significant fluctuation, especially during periods of high market volatility
or disruption. Any estimates should be taken as indicative values only and no
reliance should be placed on them. Estimated results, performance or
achievements may materially differ from any actual results, performance or
achievements. Except as required by applicable law, BHCC, the Fund, BHCM and
DWIM expressly disclaim any obligations to update or revise such estimates to
reflect any change in expectations, new information, subsequent events or

Tax treatment depends on the individual circumstances of each investor in BHCC
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 BHCC, 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. All investments are subject to risk. You are advised to
seek expert legal, financial, tax and other professional advice before making
any investment decisions.


Risk Factors

Acquiring shares in BHCC 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 BHCC (and therefore gaining exposure to the Fund) should
consult an authorised person specialising in advising on such investments. Any
person acquiring shares in BHCC must be able to bear the risks involved. These
include the following:

- The Fund is speculative and involves substantial risk.

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

- Past results of the Fund's investment manager are not necessarily
indicative of future performance of the Fund, and the Fund's performance may
be volatile.

- An investor could lose all or a substantial amount of his or her

- The Fund's investment manager has total investment and trading
authority over the Fund, and the Fund is dependent upon the services of the
investment manager. The use of a single advisor could mean lack of
diversification and, consequently, higher risk.

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

- The investment manager's incentive compensation, fees and
expenses may offset the Fund's trading and investment profits.

- The Fund is not required to provide periodic pricing or valuation
information to investors with respect to individual investments.

- The Fund is not subject to the same regulatory requirements as
mutual funds.

- A portion of the trades executed for the Fund may take place on
foreign markets.

- The Fund and its investment manager are subject to conflicts of

- The Fund is dependent on the services of certain key personnel,
and, were certain or all of them to become unavailable, the Fund may
prematurely terminate.

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

- The 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 of BHCC or the
Fund and therefore reference should be made to publicly available documents
and information.


London Stock Exchange plc is not responsible for and does not check content on this Website. Website users are responsible for checking content. Any news item (including any prospectus) which is addressed solely to the persons and countries specified therein should not be relied upon other than by such persons and/or outside the specified countries. Terms and conditions, including restrictions on use and distribution apply.


Monthly Shareholder Report - June 2014 - RNS