Hedge fund BH Macro (BHMG ) is a ‘unique’ portfolio that does well in challenging market environments, according to Investec analysts, who highlighted the shares on a 13% discount as a bargain buy.

In a note, analysts Alan Brierley and Ben Newell said BH Macro has prided itself on having an ‘inverse correlation with risk assets’ since launch in 2007 and this has been ‘most pronounced during the times of peak distress’.

During the 2007-2009 global financial crisis, the FTSE All Share fell 45.6% and the MSCI All Country World index dropped 54.1%, but BH Macro’s net asset value (NAV) rose 43.9%. More recently, in 2022 when Russia invaded Ukraine and inflation worries began, the hedge fund delivered a NAV return of 20.8%, while the FTSE dropped 10.5% and the MSCI ACWI was down 22.1%.

Brierley and Newell said with low NAV volatility and minimal correlation to equities and bonds the hedge fund has a ‘natural role to play in improving portfolio diversification’.

Now is also a good time to buy the £1.6bn flagship Brevan Howard hedge fund as it is sitting on a double-digit discount. The sterling share class is trading at a 12% discount to the NAV of 407p, while the US dollar share class (BHMU ) is doing slightly better at a 10% discount.

As recently as September 2022, shares were trading at 22% premium but the fund had a difficult 2023 when it was hit by a ‘perfect storm’ of performance challenges, ‘unrealised fears’ that Rathbones and Investec would become forced sellers, a broad deterioration in sentiment towards the industry, and a greater appetite for risk assets.

The fund’s net asset value fell 7.1% between March and May last year after its key interest rate trade went wrong as markets priced in cuts in US interest rates following the collapse of Silicon Valley Bank and subsequent contagion risk. While they recovered some of the losses in the latter half of the year, the NAV was still 2.6% lower over one year.

The share price had a worse time, with the sterling share class down 23% and the US share class (BHMU) down 21.5% over the 12-month period.

The derating followed a bumper £315m share issue in February which saw the company capitalise on its strong market-bucking performance in 2022 when it returned nearly 22% to shareholders.

Nervousness around the merger of wealth managers Rathbones and Investec, who had a combined stake of more than 30%, the threshold which would ordinarily require a bid to be made under Takeover Panel rules, also weighed on the stock.

Prior to the merger’s completion, trust chair Richard Horlick warned investors the combination of the two wealth managers could create an overhang which may lead to forced selling. While the stake has been reduced, this has been minimal and steady, with the latest stock exchange notice saying that the wealth manager had just under 28% as of early November.

With Rathbones’ intentions uncertain, the board held off on buybacks in the third quarter despite the derating of the shares. However, in December when the shares hit a nadir of a 15% discount the board became more active. This activity continued into 2024 with 2.8m shares already purchased, according to stock exchange announcements.

Buybacks along with better performance should support the share price and offer another reason to invest, according to the Investec analysts.

‘When (not if) we next hit choppy waters, we expect NAV gains to be accompanied by a return to a premium rating, which would equate to significant outperformance of risk assets,’ the analysts wrote in a note.