Brevan Howard Global Limited commentary for the month ended July 31, 2016.

Also see Q3 hedge fund letters


Brevan Howard Global Limited (“BHG”) is a closed-ended investment company, registered and incorporated in Guernsey on 25 February 2008 (Registration Number: 48555).

Prior to 1 September 2014, BHG invested all its assets (net of short-term working capital) in Brevan Howard Global Opportunities Master Fund Limited (“BHGO”). With effect from 1 September 2014, BHG changed its investment policy to invest all its assets (net of short-term working capital) in Brevan Howard Multi-Strategy Master Fund Limited (“BHMS” or the “Fund”) a company also managed by BHCM.

[drizzle]BHG was admitted to the Official List of the UK Listing Authority and to trading on the Main Market of the London Stock Exchange on 29 May 2008.

Total Assets: $476 mm1

1. As at 29 July 2016 by BHG’s administrator, Northern Trust.

Summary Infomation

Brevan Howard Global Limited

ASC 820 Asset Valuation Categorisation*

Brevan Howard Global Limited

Brevan Howard Global Limited

Portfolio Update for BHG

The information in this section has been provided to BHG by BHCM.

Monthly, quarterly and annual contribution (%) to the performance of BHG USD Shares (net of fees and expenses) by asset class*

Brevan Howard Global Limited

Monthly, quarterly and annual contribution (%) to the performance of BHG USD Shares (net of fees and expenses) by strategy group*

Brevan Howard Global Limited

BHG Underlying Investment Exposures as at 29 July 2016 (allocations subject to change):

Brevan Howard Global Limited

Exposures by Asset Class as at 29 July 2016 (exposures subject to change):

Brevan Howard Global Limited

Monthly Performance Review for BHG

The information in this section has been provided to BHG by BHCM.

BHG Monthly Commentary

The NAV per share of BHG’s USD shares appreciated by 0.13% and the NAV per share of BHG’s GBP shares appreciated by 0.13% in July 2016.

Brevan Howard Global Limited

Brevan Howard Master Fund Limited (“BHMF”)

The NAV per share of BHMF Class Z USD shares depreciated by 0.96% in July. Interest rate trading generated modest losses overall, predominantly driven by long directional positioning in US and Japanese rates as well as European swap spread and peripheral bond trading. Gains in short end US basis trading as well as interest rate volatility trading provided a partial offset. FX losses came from directional trading in a broad range of currency pairs; most notably JPY and EUR, and to a lesser degree emerging market currencies.

Brevan Howard Asia Master Fund Limited (“BHA”)

The NAV per share of BHA Ordinary USD shares appreciated by 0.26% in July. Gains in interest rate trading were due in most part to relative value basis trading in the short end of the US curve whilst offsetting losses came predominantly from curve trading in Japan as well as directional trading in the Sterling curve. FX and equity trading generated small gains and losses respectively with little by way of themes.

BH-DG Systematic Trading Master Fund Limited (“BHDGST”)

The NAV per share of BHDGST Class Z USD shares appreciated by 1.44% in July. Equity index futures were the best performing sector this month with gains also realised in bond and metal futures. BHDGST moderated exposure in most bond futures in July. Notable exceptions were additions to longs in Gilts, BTP and Australian bond futures. Within STIR futures, the model reversed a long position in Canadian Bankers’ Acceptance to a short, whilst cutting longs in Eurodollar and Euribor futures across the curve. In contrast, BHDGST more than doubled its position in short sterling futures as UK rates expectations fell in the run up to and post the Brexit referendum. The model reversed short positions in the CAC 40, DAX and Euro Stoxx amongst other European indices to long. In FX, overall exposure outside of the major currencies was little changed. Dramatic moves related to the Brexit referendum saw the model increase its short position in GBP and flip a net short to long in the euro. The model reduced its long stance in JPYUSD in response to volatility observed from reports over the BoJ’s expected stimulus package. In the energy sector, July saw the model adopt a more bearish position.

Direct Investment Portfolio (“DIP”)

The Direct Investment Portfolio (“DIP”) appreciated by 0.78% in July. The DIP generated the bulk of the profits in FX and equity index trading. In FX, short exposure to GBP against USD as well as FX volatility trading were the main positive contributors. In equities, long exposure to the S&P and Nikkei generated gains. Additional gains were generated in credit where agency mortgage trading was a key driver. Some of the profits were offset by losses in interest rates trading where long exposure in JPY at the end of the month was one of the main detractors. Additional smaller losses arose from long exposure to oil.

Manager’s Market Review and Outlook

The information in this section has been provided to BHG by BHCM.

Market Commentary

United States

Reassuring signs from the labour market allayed concerns about the downside risks to the economic expansion. Payroll employment surged in July by 255,000 bringing the average monthly gain over the last three months back up to 190,000. Although the unemployment rate was unchanged at 4.9%, the same as at the start of the year, other details in the report were generally solid.

At the same time, growth through the middle of the year looks moderate at best. After expanding at only 1.2% (annualised) in the second quarter, the available indicators about the third quarter point to an unspectacular bounce-back to above-trend growth. Consumption spending took a breather in July after setting a heady pace in the previous quarter. Business fixed investment intentions suggest a tepid outlook; however, inventory investment should add to growth for the first time in more than a year now that stocks appear to be better aligned with sales.

Price inflation has been quiescent. Headline inflation is stuck at around 1% and core inflation has been approximately 1.6% since the beginning of the year. Wage inflation is a little more evident, with average hourly earnings reaccelerating to a 2.6% rate over the last year. Given the weak readings on price inflation, nominal wage gains are translating into better real wage gains. With real income expanding, household wealth holding near record highs, and a favourable environment for borrowing, the fundamentals supporting consumption spending in the second half of the year are positive.

Following its July meeting, the Federal Reserve noted that near-term risks to the outlook have “diminished.” However, following an ill-fated flirtation with calendar-based guidance after its April meeting, there was no hint about the timing of future actions. With the economy’s neutral rate of interest significantly lower than in the past and no signs of inflation overheating, policy makers appear content to wait and see how the outlook shapes up in the second half of the year before making any decisions.

United Kingdom

Although growth was still resilient up to the end of Q2 2016, the UK faces considerable policy, and thus economic

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