A tender offer announced by the £866m BH Macro investment trust could lead to its sister portfolio implementing a similar strategy, analysts have forecast.
The board of BH Macro, a fund of hedge funds run by Brevan Howard, last week proposed to buy back up to a quarter of its share capital in light of the trust trading on a discount to net asset value (NAV) of 5 per cent.
If successful, the tender may put pressure on BH Global to offer investors a similar opportunity to exit, according to Numis Securities.
BH Global, currently trading at a 7.8 per cent discount, has already pursued a share buyback policy in an attempt to control the discount.
Ewan Lovett-Turner, director of investment company research at Numis, said: “BH Global is facing most of the similar issues as BH Macro, namely dull performance and a persistent discount, despite significant buybacks.
“I would not expect anything imminently from BH Global, but if BH Macro’s tender has a positive impact in the medium term, it would not be surprising to see something similar happen in the sister fund.”
However, Mr Lovett-Turner noted that the £336m BH Global vehicle was more constrained by size than BH Macro. Although its sterling class is a reasonable £298m, he suggested the board might be wary of shrinking the trust to a sub-scale level.
BH Macro’s offer highlights the growing difficulties in controlling discounts in the space. The trust has already attempted share buybacks, an annual partial return of capital up to an equivalent of the prior year’s NAV growth, and a class closure vote if the discount averages more than 10 per cent a year.
These mechanisms will continue following the tender announcement, though the ability to convert between share classes will be suspended.
Mr Lovett-Turner said: “The mechanism appears sensible to us, balancing the interests of shareholders looking to exit a substantial portion of their holding, with remaining investors who will benefit from an uplift to NAV from shares tendered at a discount.”
The board has already bought back £113m of BH Macro’s sterling share class over the past year, amounting to 24 per cent of the fund’s share capital.
In addition, £5.6m of the US dollar share class and £15.2m of the euro share class have also been repurchased.
If the offer is fully subscribed, it will reduce the trust to a market cap of around £660m. The sterling share class currently accounts for £623m of assets.
