SIr Michael Bunbury talks of the appeal of safe haven trust BH Global

News Team, 16/04/2020

Listed trust BH Global (BHG) is a complex beast. Its assets are managed by hedge fund specialists Brevan Howard and contains various funds managed by the firm. However, given the decimation of the markets perhaps the most important thing to note is that it was up 15.54 percent this year to 31 March, including a 12.37 percent gain in that month alone.

Sir Michael Bunbury is the chairman of BHG, he describes his role as 'looking after the shareholders'. Given the amazing results, shareholders should certainly be pleased but what is the fund intended to do?

"It's very much about helping people construct their portfolios and is a low volatility fund intended as a safe harbour when the going gets tough," said Sir Michael.

Well times rarely get much tougher than they are right now and he states that typically when a market such as the S&P 500 is down, BHG is up.

Sir Michael mentions that since 2008, there's only been one year when the NAV was down, in 2015 and this was only by 1.3 percent.

For investors who like those involved in the business of the fund to be invested themselves, Sir Michael certainly has skin in the game, £200,000 of his retirement fund is invested in BHG.

Given that Brevan Howard manages the assets, Sir Michael is not in the best position to comment on the complex nature of some of the trades involved in the trust. A brief rundown of the strategy will hopefully display how the fund has managed to outperform while most falter.

The largest proportion of value at risk (VaR) is interest rates, which make up for 37 percent of the fund (as of 29 February). For instance during that month directional trading of global interest rates drove returns, with strong gains coming from US rates trading.

Another large part of the fund concerns volatility, with the Brevan Howard Global Volatility Master Fund concentrating on this part of the alpha generation. This fund did well as volatility turned aggressively in February after COVID-19 news began to hit the markets. Equity markets corrected lower  while  interest  rates  dropped  globally.  Short-dated volatility  in  equities  shot  higher  to  levels  last  seen  in December  2018.

Sir Michael said that Brevan Howard has an incredibly strong risk control system to make sure volatility is controlled and with volatility making up for 24 percent of the VaR, having a firm that are experts in the field is great news for investors.

In terms of which type of investors make up the largest part of the shareholder register, Sir Michael said "far and away wealth managers", adding that Quilter is the largest single shareholder. 

Other stakeholders include sophisticated private investors building their own portfolios who know quite a bit about the mechanics of portfolio construction. 

Given the stand out performance of the fund, it is still trading on around a 10 percent discount, which Sir Michael describes as 'disproportionately large'. He added that this 'presents a great buying opportunity' before stating with a hint of mischief 'but I would say that!'.

Sir Michael is also chair of private equity trust Harbourvest, a Fundeye  favourite you can read about here.

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