Performance by Asset Class Monthly, quarterly and annual contribution (%) to the performance of BHM USD Shares (net of fees and expenses) by asset class as at 30 November 2018
| 2018 |
Rates |
FX |
Commodity |
Credit |
Equity |
Total |
| November 2018 |
-0.10 |
0.47 |
0.07 |
0.05 |
-0.10 |
0.38 |
| Q1 2018 |
0.93 |
-0.20 |
0.01 |
-0.06 |
-0.07 |
0.58 |
| Q2 2018 |
8.54 |
0.46 |
-0.02 |
0.02 |
-0.02 |
8.94 |
| Q3 2018 |
1.70 |
0.89 |
-0.06 |
-0.23 |
-0.35 |
1.95 |
| QTD 2018 |
0.37 |
1.07 |
0.03 |
0.01 |
0.22 |
1.71 |
| YTD 2018 |
11.83 |
2.23 |
-0.03 |
-0.26 |
-0.22 |
13.62 |
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. Methodology and Definition of Contribution to Performance: Attribution by asset class is produced at the instrument level, with adjustments made based on risk estimates. The above asset classes are categorised as follows: “Rates”: interest rates markets
“FX”: FX forwards and options
“Commodity”: commodity futures and options
“Credit”: corporate and asset-backed indices, bonds and CDS “Equity”: equity markets including indices and other derivatives Performance by Strategy Group Monthly, quarterly and annual contribution (%) to the performance of BHM USD Shares (net of fees and expenses) by strategy group as at 30 November 2018
| 2018 |
Macro |
Systematic |
Rates |
FX |
Equity |
Credit |
EMG |
Commodity |
Total |
| November 2018 |
-0.27 |
-0.02 |
0.50 |
0.15 |
-0.00 |
0.01 |
0.00 |
-0.00 |
0.38 |
| Q1 2018 |
0.87 |
0.02 |
-0.46 |
-0.09 |
-0.00 |
-0.03 |
0.28 |
-0.00 |
0.58 |
| Q2 2018 |
4.29 |
0.05 |
2.91 |
0.34 |
-0.00 |
-0.06 |
1.33 |
-0.00 |
8.94 |
| Q3 2018 |
-1.09 |
0.02 |
2.10 |
0.58 |
-0.00 |
0.00 |
0.35 |
-0.00 |
1.95 |
| QTD 2018 |
-0.60 |
-0.10 |
1.59 |
0.22 |
-0.00 |
0.03 |
0.57 |
-0.00 |
1.71 |
| YTD 2018 |
3.43 |
-0.01 |
6.26 |
1.04 |
-0.01 |
-0.05 |
2.54 |
-0.00 |
13.62 |
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. Methodology and Definition of Contribution to Performance: Strategy Group attribution is approximate and has been derived by allocating each trader book in the Fund to a single category. In cases where a trader book has activity in more than one category, the most relevant category has been selected. The above strategies are categorised as follows: “Macro”: multi-asset global markets, mainly directional (for the Fund, the majority of risk in this category is in rates) “Systematic”: rules-based futures trading “Rates”: developed interest rates markets “FX”: global FX forwards and options “Equity”: global equity markets including indices and other derivatives “Credit”: corporate and asset-backed indices, bonds and CDS “EMG”: global emerging markets “Commodity”: liquid commodity futures and options The information in this section has been provided to BHM by BHCM US The macro data were solid in November. Real GDP growth is tracking near 3% at an annual rate in the current quarter and the labour market slowed only a little in the latest release. Headline inflation is following energy prices down but core inflation is maintaining its momentum. While financial markets are grappling with a number of prominent risks, the Federal Reserve delivered its final rate hike of the year in December. The Fed pointed to “some further” rate hikes in 2019, although the timing and pace will be data-dependent. Elsewhere in Washington, partisan battles on a range of issues heated up in the wake of the midterm elections which saw Democrats take control of the House. UK The focus in UK markets continues to be on Brexit. More recently, 48 letters from Conservative MPs triggered a vote of confidence on Prime Minister Theresa May’s leadership of the Conservative Party, which caused the pound to temporarily fall below 1.25 against the dollar, the lowest level since April 2017. However, the Prime Minster successfully fended off the leadership challenge winning 200 (against 117) votes from Conservative MPs. However, PM May only won the vote after announcing she would not lead the Conservative Party at the next scheduled general election in 2022. Furthermore, despite PM May’s win, the vote still signals that there is not enough parliamentary support for PM May’s current Brexit deal (or any Brexit outcome for that matter), which is why she had delayed the Brexit vote in parliament in the first place. The parliament vote is now expected to take place before 21 January 2019 as PM May attempts to negotiate an improved deal with the EU. Meanwhile, the Brexit-induced uncertainty has caused economic activity to moderate, with surveys suggesting GDP should grow around 0.2% q/q in Q4. The uncertainty has also caused the market to price out expectations of a Bank of England rate hike; a full rate hike is now only priced in by early 2020, compared to autumn-2019 priced a month prior. This is despite the fact that wage inflation (which is reflective of underlying inflationary pressure) has continued to pick up, reaching a rate of 3.3% y/y (the fastest pace since 2008) and the labour market continues to perform well, with unemployment remaining at a near-decade low of 4.1%. EMU Following disappointing GDP data for the EMU in Q3, the Composite PMI fell further in November, to its lowest level since the end of 2014. This outcome continues to dismantle the enduring recovery scenario envisaged by both the consensus and European Central Bank (“ECB”), together with further slowdown and a combination of domestic weakness (reflecting weak potential growth) and weaker global demand. Regarding consumer prices, EMU headline inflation fell to 2.0% y/y in November, from 2.2% in October, and EMU Core inflation also fell to 1.0% from 1.1%, confirming that underlying inflation remains subdued and shows little sign of a ‘self-sustaining’ convergence process to target. Indeed, with the exception of wages (which are responding with the usual lag to past growth) incoming data since June have suggested the opposite, with the slowdown in activity not appearing to signal a convincing end to the inertia in Core inflation going forward. Nonetheless, the ECB confirmed it would end net quantitative easing purchases at the end of December. The 2019 ECB GDP growth forecast of 1.7% (versus 1.8% in September) seems optimistic, based on a quarterly profile of 0.5% q/q on average. However, while keeping a balanced growth assessment of risks, the Council acknowledged that “the balance of risks is moving to the downside”. Despite some meaningful downwards revision to Core inflation, the Core inflation projections appear optimistic too, and are envisaged to rise from just 1.0% in 2018 to 1.4% in 2019, 1.6% in 2020 and 1.8% in 2021. The ECB intends to reinvest principal payments for “an extended period of time past the date when it [the Governing Council] starts raising the key ECB interest rates…”; likely to try and temper the tightening impact of the decision to end net purchases. However, the rate forward guidance remained unchanged, with Mario Draghi expecting rates to remain at their present levels “at least through the summer of 2019, and in any case for as long as necessary…”. Japan Japanese real GDP fell at an annual rate of 2.5% in Q3, with reversals from Q2 in private consumption, investment and exports. Q4 data so far have been mixed but do not corroborate further weakness. Import prices jumped in October, following two weaker months. The Economy Watchers Survey strengthened. The services Markit Purchasing Managers' Index (“PMI”) was flat in November at a relatively high level, while the manufacturing PMI edged down. Inflation data continue to disappoint. Western core prices (Consumer Price Index excluding all food and energy) edged up 0.1% in October, but have risen a mere 0.4% over the last twelve months. Tokyo prices were flat in November. Various factors influencing the inflation outlook appear to have improved somewhat on balance, though not uniformly. Consumer inflation expectations have increased 0.3 pp over the last two months to its highest level in three years. Wage data do not show a consistent acceleration, but the pace of gains did step up, and the y/y growth rate in contractual earnings is at the high end of the range. The yen-dollar exchange rate has been range bound in the last 2-1/2 months, though the most recent data are at the stronger end of the range. With the decline in real GDP in Q3, the Cabinet Office’s estimate of the output gap fell back to neutral. The Bank of Japan (“BoJ”) has been relatively quiet this month. Governor Kuroda denied some market commentary that the recent slowing in the pace of bond buying represents a stealth tightening. BoJ policy is to control the ten year Japanese Government Bond rate at about zero. The policy has tended to be implemented both by public announcements to set market expectations and bond buying. A stealth tightening would seem to be counter-productive; it would invite speculation, which would be inimical to its goals. Moreover, the proof is in the interest rate, which has edged down of late. BoJ policy is not to buy more bonds than necessary to control rates. The Company Secretary Northern Trust International Fund Administration Services (Guernsey) Limited bhfa@ntrs.com +44 (0) 1481 745736 |