The sterling shares of BH Macro (BHMG) spiked at the end of trading on Monday after Brevan Howard, manager of the £1.3bn London-listed hedge fund, said it was in the process of launching a new private fund that could buy its discounted shares.

Having edged slightly higher, the share price rose nearly 2% from 406p to 414p in the last 40 minutes of trading as Brevan Howard said the new fund would “invest and trade in the strategies and funds managed by the manager”. This includes BH Macro, whose main sterling share class stands on a 10% discount, and the Cayman Islands Master Fund in which the feeder fund wholly invests.

“Specifically, the fund is expected to invest in, amongst other things, both the company and Brevan Howard Master Fund Limited (the ‘Master Fund’), in which the company invests all of its assets (net of expenses and short-term working capital). The fund will have the ability to trade in shares of either currency class in the capital of the company (‘shares’) through on-market purchases and sale,” BH Macro said.

Confusingly, it added that the new fund’s purchases of BH Macro sterling or dollar shares would be “funded by redemptions of its direct investments in the Master Fund” and the proceeds of sales of BH Macro shares would be invested in the Master Fund or other strategies and funds run by the manager.

BH Macro has been contacted to provide a clearer explanation.

Separately, the company also published its monthly shareholder report which confirmed the net asset value at 31 December of its sterling shares stood at £4.41 and $4.52 for its dollar shares. As these are the same as its initial estimates on 6 January it should, according to another statement on 8 January, mean that class closure resolutions will be trigged for both share classes. However, the company has not made a specific announcement on this.

Last week BH Macro said it had negotiated an increase to 14.99%, up from 5%, in the amount of shares it could buy back. This will be useful as it attempts to narrow the discount that looks to have triggered a second round of wind-up votes. It survived a similar vote a year ago with 98% support.

Through the Master Fund, BH Macro invests in Brevan Howard’s best currency, bond and derivatives traders with the aim of generating steady, non-correlated returns. It has a track record of rising, or not falling as much as the market, in crashes. That makes it a potential safe haven with valuations of many equities, bonds and commodities stretched and looking vulnerable to a correction.

However, the share price discount that emerged three years ago after a £312m share issue weakens the proposition. While the sterling shares successfully shielded investors from the volatility over US tariffs last year, the 1.5% rise in their net asset value was not passed on to shareholders who saw the shares slip from 406p to 399p over the year.

The gap is worse over three years with a total underlying investment return of 6% dissipated by a lagging share price that lost shareholders 9%, according to Winterflood data.

Our view

James Carthew, head of investment company research at QuotedData, said: “The market appears to be interpreting this BH Macro announcement as a sign that a fresh buyer of BH Macro shares is on the scene, which would hopefully help narrow its discount. However, without any indication of how large the new fund is or how it will work, it is hard to ascribe much faith in its long-term ability to tackle the issue. Greater clarity is needed please.”