BH Macro (BHMG) has negotiated an increase in the amount of shares it can buy back as the £1.3bn Brevan Howard hedge fund grapples with a 10% share price discount that looks set to trigger wind-up votes for its sterling and dollar listings.

The board of the Guernsey investment company, chaired by Richard Horlick, has announced that in future it can buy up to 14.99% of BHMG shares each year, a standard across the London listed closed-end funds market.

Until now the board has been restricted to buying just 5% as above that limit the company has to pay fund manager Brevan Howard Capital Management an additional fee of 2% of the shares repurchased. 

That’s a big disincentive given the company is already expensive with annual ongoing charges of around 3% in its last financial year to 30 June 2025. Two years ago, Capital Gearing Trust (CGT) fund manager Peter Spiller called the 2% fee on buybacks “indefensible” and criticised the then low level of shares bought back.

Since then share buybacks have stepped up and a further increase should help narrow the discount which is wider than the one-year average of 8.1%, causing the need for the votes and undermining its claim to be a safe haven from volatile markets. 

Under the company’s rules, if the share price discount averages more than 8% in a calendar year it triggers share class closure votes, which could in theory see the company have to wind up and return money to shareholders.

Earlier this month the company said if there was no change in its net asset value (NAV) in December then votes to close the main sterling and smaller dollar share classes would have to be held. The NAV is due to be announced on Friday. 

The company is unlikely to be worried if the ballots take place. A year ago, when similar votes were held, the company sailed through with 98% support in the sterling share class on a high 72% turnout.

Despite that high level, demand for the shares has waned since a £312m bumper share issue three years ago coincided with a weak period of performance leading to a derating of the stock.

BHMG, a feeder fund to the Brevan Howard Master Fund in the Cayman Islands, says it is “conscious of expenses and works hard to maintain a sensible balance between good quality service and cost”.

It believes investors will pay more for the fund given its record of capital preservation when markets fall. The portfolio is unique on the London Stock Exchange for providing access to Brevan Howard’s best traders in currencies, derivatives and bonds. It aims to provide a genuine low-risk alternative to bond and equity markets. 

The company’s factsheet shows that in the 20 worst months for the US stock market since its 2002 launch, its shares have risen or been flat on 16 occasions when the S&P 500 index has fallen from around 5% to 15%. 

On the four months the shares fell in a downturn, the declines of around 2% to 7% were less than the US market. The worst drawdown occurred during the 2008 financial crisis. 

However, as a result of the shares lagging the company’s underlying portfolio, shareholders in the non-dividend paying company have seen a total return of just 10% over five years well below the 33% growth in asset value. 

Our view

QuotedData’s head of investment company research James Carthew said: “BH Macro’s returns have been lacklustre for a while now and trail by some distance the more defensively positioned trusts in the Flexible Investment sector such as Capital Gearing, Personal Assets (PNL), Ruffer (RICA), and Global Opportunities (GOT). As investors grow more uneasy about market valuations, I’d expect interest in these funds to pick up. It is impossible to know how exactly they will perform in a downturn but at least with the flexible trusts you get good insight into what they are invested in. That means BH Macro wouldn’t be my, or many other investors’, first choice, which might help explain its 10% discount. More buybacks are needed.”