TIDMBHCU
RNS Number : 5788T
BH Credit Catalysts Limited $
06 October 2014
BH CREDIT CATALYSTS LIMITED
MONTHLY SHAREHOLDER REPORT:
AUGUST 2014
YOUR ATTENTION IS DRAWN TO THE DISCLAIMER AT THE END OF THIS DOCUMENT
BH Credit Overview
Catalysts BH Credit Catalysts Limited ("BHCC") is a closed-ended investment
Limited company, registered and incorporated in Guernsey on 19 October
Manager: 2010 (Registration Number: 52520).
Brevan Howard BHCC invests all of its assets (net of short-term working
Capital capital) in the ordinary shares of Brevan Howard Credit
Management Catalysts Master Fund Limited (the "Fund"). The investment
LP ("BHCM") manager of the Fund is DW Investment Management, LP ("DWIM").
Administrator: BHCC was admitted to the Official List of the UK Listing
Northern Authority and to trading on the Main Market of the London
Trust Stock Exchange on 14 December 2010.
International Total Assets
Fund $234 mm(1)
Administration 1. As at 29 August 2014 by BHCC's administrator, Northern
Services Trust.
(Guernsey)
Limited
("Northern
Trust")
Corporate
Brokers:
J.P. Morgan
Cazenove
Dexion Capital
Plc
Listing:
London Stock
Exchange
(Premium
Listing)
Summary BH Credit Catalysts Limited NAV per Share (as at 29 August
Information 2014) Share NAV (USD NAV per
Class mm) Share
------------ --------- ---------
USD Shares 52.2 $13.86
------------ --------- ---------
GBP Shares 182.1 GBP13.92
------------ --------- ---------
BH Credit Catalysts Limited NAV per Share % Monthly Change USD Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD
------ ----- ----- ----- ----- ------ ------ ----- ------ ------ ------ ------ ------ ------
2011 1.78 1.55 0.91 2.14 -0.03 -2.16 0.50 -0.37 -0.96 -0.50 -1.49 -0.50 0.81
------ ----- ----- ----- ----- ------ ------ ----- ------ ------ ------ ------ ------ ------
2012 0.64 1.15 2.36 1.51 1.17 -0.10 1.38 1.39 1.65 0.80 0.73 1.26 14.83
------ ----- ----- ----- ----- ------ ------ ----- ------ ------ ------ ------ ------ ------
2013 1.73 0.24 1.19 1.07 1.74 -0.52 0.16 1.07 1.18 1.68 1.70 1.52 13.50
------ ----- ----- ----- ----- ------ ------ ----- ------ ------ ------ ------ ------ ------
2014 1.07 1.43 0.49 1.51 0.85 1.47 0.58 -1.00 6.55
------ ----- ----- ----- ----- ------ ------ ----- ------ ------ ------ ------ ------ ------
GBP Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD
------ ----- ----- ----- ----- ----- ------ ----- ------ ------ ------ ------ ------ ------
2011 1.74 1.54 0.95 2.08 0.05 -2.16 0.51 -0.33 -0.93 -0.50 -1.49 -0.47 0.89
------ ----- ----- ----- ----- ----- ------ ----- ------ ------ ------ ------ ------ ------
2012 0.64 1.15 2.40 1.50 1.22 -0.06 1.40 1.36 1.62 0.81 0.75 1.26 14.95
------ ----- ----- ----- ----- ----- ------ ----- ------ ------ ------ ------ ------ ------
2013 1.76 0.27 1.20 1.05 1.81 -0.52 0.18 1.06 1.13 1.71 1.68 1.54 13.62
------ ----- ----- ----- ----- ----- ------ ----- ------ ------ ------ ------ ------ ------
2014 1.08 1.43 0.53 1.51 0.88 1.48 0.63 -1.01 6.69
------ ----- ----- ----- ----- ----- ------ ----- ------ ------ ------ ------ ------ ------
Source: Fund data is provided by the administrator of the
Fund, International Fund Services (Ireland) Limited. BHCC
NAV and NAV per Share data is provided by BHCC's administrator,
Northern Trust. BHCC NAV per Share % Monthly Change is calculated
by BHCM. BHCC NAV data is unaudited and net of all investment
management fees (2% annual management fee and 20% performance
fee) and all other fees and expenses payable by BHCC.
NAV performance is provided for information purposes only.
Shares in BHCC do not necessarily trade at a price equal
to the prevailing NAV per Share.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS
ASC 820 Asset Brevan Howard Credit Catalysts Master Fund Limited
Valuation Unaudited Estimates as at 29 August 2014 % of Gross
Categorisation* Market Value*
------- ---------------
Level
1 51
------- ---------------
Level
2 45
------- ---------------
Level
3 4
------- ---------------
Source: BHCM
* These estimates are unaudited and have been calculated
by BHCM using the same methodology as that used in the most
recent audited financial statements of the Fund. These estimates
are subject to change.
Level 1: This represents the level of assets in the portfolio
which are priced using unadjusted quoted prices in active
markets that are accessible at the measurement date for
identical, unrestricted assets or liabilities.
Level 2: This represents the level of assets in the portfolio
which are priced using either (i) quoted prices that are
identical or similar in markets that are not active or (ii)
model-derived valuations for which all significant inputs
are observable, either directly or indirectly in active
markets.
Level 3: This represents the level of assets in the portfolio
which are priced or valued using inputs that are both significant
to the fair value measurement and are not observable directly
or indirectly in an active market.
Performance The information in this section has been provided to BHCC
Review for by DWIM.
the Fund
The NAV per share of BHCC USD Shares depreciated by 1.00%
(net of fees and expenses) in August. The majority of losses
came from company specific investments in corporate strategies.
Performing long/short positions were the largest negative
contributors during August. The largest individual losing
position for the month was the Fund's holdings in various
debt and credit derivatives of Caesars Entertainment and
its affiliates. For some time, Caesars' largest subsidiary
has been moving profitable assets into affiliates, to the
detriment of existing debtholders. These events are already
the subject of disputes in the courts, as outlined in the
13 September 2014 New York Times article titled "Caesars'
Debt: A Game of Dealer's Choice". The Fund has held various
positions in Caesars over time, changing both sizing and
specific positioning as events and pricing changed, and
despite the August declines, the positions held have been
net marginal positive contributors in 2014. Following new
disclosures in August, regardless of the legality or validity
of such actions, our view of the uncertainties regarding
both the outcome and timeframe for resolution of Caesars'
debts materially increased and we reduced risk.
Beyond Caesars, long positions in select Korean companies
also detracted, partly as a result of their S&P 500 hedges
(the KOSPI was down approximately 50bp in August, while
the S&P 500 rallied 4%), and partly due to delays of positive
catalysts the market was anticipating to occur in July or
August. The Fund had gains in long homebuilder positions,
producing the best performing long/short returns for the
month.
Across the Fund's positions, hedges detracted from performance,
as gains from idiosyncratic longs were outstripped by losses
on index shorts. This was particularly true in the latter
part of the month when headline indices rallied meaningfully
(the S&P 500 increased nearly 5% from intra-month lows on
7 August; while the CDX High Yield index tightened nearly
50bp over the same period).
The Fund's residential- and commercial-mortgage backed investments
held up well through the volatility in risk assets over
July and August, outperforming other areas of fixed income
so far in the third quarter. But the pattern described above
(index shorts losing more than gains on idiosyncratic longs)
resulted in a small net loss for the MBS/ABS strategies
in the Fund.
Structured corporate positions were up slightly in August,
as gains from bespoke CDO equity trades were offset by small
losses in index tranche positions.
Distressed positions also showed small positive returns
on the month. Notable contributors included holdings in
Banco Espirito Santo and Puerto Rico Electric Power Authority
bonds.
Finally, the Fund lost on interest rate hedges over August,
as 10 year Treasury rates fell from 2.56% to 2.34% over
the course of the month, despite the positive second quarter
US GDP revisions at the end of July.
Investment The information in this section has been provided to BHCC
Manager's by DWIM.
Market Review
and Outlook Overall, August saw the reversal of much of July's price
action in risk assets. While the start of the month was
challenging, by the end of August equity and credit markets
had turned around: the S&P 500 set new all-time highs in
the latter part of the month and HY credit spreads were
nearly back to where they began the third quarter. Interest
rates also tightened over August, with 10 year US interest
rates touching lows of 2.34% following the US Federal Reserve's
annual Jackson Hole conference, where Fed Chair Janet Yellen
acknowledged some positive developments in the US economy
but also focused on the need for improvements in labour
markets.
6/30/2014 7/31/2014 8/30/2014
-------------------- ---------- ---------- ----------
CDX HY (bp spread) 303 344 311
S&P 500 1,960 1,931 2,003
US 10yr Rates
(%) 2.53 2.56 2.34
-------------------- ---------- ---------- ----------
Source: Bloomberg
On the demand side of credit, fund flows were mixed over
August. Investment grade bond funds saw solid inflows throughout
the month, while high yield funds had large outflows in
the first week of August but then stabilised, with inflows
over the latter portion of the month amounting to approximately
half of the outflows from the first week. Equity funds were
essentially flat on the month, although non-US equity funds
saw notably better flows than US-only funds.
In terms of supply, new issue markets were much quieter
this August than in any August since the 2008 credit crisis.
This was especially true for high yield issuance, which
dwindled to virtually zero (a mere USD 2bn) compared to
nearly USD 45bn issued in August 2013.
Mortgage- and asset-backed markets were fairly subdued in
August. Legacy non-agency residential bond prices were broadly
flat for the month, although spreads on more recently issued
agency credit risk-sharing instruments (STACR/CAS deals)
widened, continuing a trend that started in July.
Spreads on new issue CMBS also widened in August, particularly
in the BBB portion of the capital structure. The market
had difficulty absorbing increased new supply in July and
August, and as more new issuance is widely expected into
year end, there continue to be concerns about market-clearing
prices for this portion of the capital structure in particular.
Enquiries Northern Trust International Fund Administration Services
(Guernsey) Limited
Harry Rouillard +44 (0) 1481 74 5315
Important Legal Information and Disclaimer
BH Credit Catalysts Limited ("BHCC") is a feeder fund investing
in Brevan Howard Credit Catalysts Master Fund Limited (the "Fund").
Brevan Howard Capital Management LP ("BHCM") and DW Investment
Management, LP ("DWIM") have supplied certain information herein
regarding BHCC's and the Fund's performance and outlook.
The material relating to BHCC and the Fund included in this
report is provided for information purposes only, does not
constitute an invitation or offer to subscribe for or purchase
shares in BHCC or the Fund and is not intended to constitute
"marketing" of either BHCC or the Fund as such term is understood
for the purposes of the Alternative Investment Fund Managers
Directive as it has been implemented in states of the European
Economic Area. This material is not intended to provide a
sufficient basis on which to make an investment decision.
Information and opinions presented in this material relating to
BHCC and the Fund have been obtained or derived from sources
believed to be reliable, but none of BHCC, the Fund, BHCM or DWIM
make any representation as to their accuracy or completeness. Any
estimates may be subject to error and significant fluctuation,
especially during periods of high market volatility or disruption.
Any estimates should be taken as indicative values only and no
reliance should be placed on them. Estimated results, performance
or achievements may materially differ from any actual results,
performance or achievements. Except as required by applicable law,
BHCC, the Fund, BHCM and DWIM expressly disclaim any obligations to
update or revise such estimates to reflect any change in
expectations, new information, subsequent events or otherwise.
Tax treatment depends on the individual circumstances of each
investor in BHCC and may be subject to change in the future.
Returns may increase or decrease as a result of currency
fluctuations.
You should note that, if you invest in BHCC, your capital will
be at risk and you may therefore lose some or all of any amount
that you choose to invest. This material is not intended to
constitute, and should not be construed as, investment advice. All
investments are subject to risk. You are advised to seek expert
legal, financial, tax and other professional advice before making
any investment decisions.
THE VALUE OF INVESTMENTS CAN GO DOWN AS WELL AS UP. YOU MAY NOT
GET BACK THE AMOUNT ORIGINALLY INVESTED AND YOU MAY LOSE ALL OF
YOUR INVESTMENT. PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF
FUTURE RESULTS.
Risk Factors
Acquiring shares in BHCC may expose an investor to a significant
risk of losing all of the amount invested. Any person who is in any
doubt about investing in BHCC (and therefore gaining exposure to
the Fund) should consult an authorised person specialising in
advising on such investments. Any person acquiring shares in BHCC
must be able to bear the risks involved. These include the
following:
-- The Fund is speculative and involves substantial risk.
-- The Fund will be leveraged and will engage in speculative
investment practices that may increase the risk of investment loss.
The Fund may invest in illiquid securities.
-- Past results of the Fund's investment manager are not
necessarily indicative of future performance of the Fund, and the
Fund's performance may be volatile.
-- An investor could lose all or a substantial amount of his or
her investment.
-- The Fund's investment manager has total investment and
trading authority over the Fund, and the Fund is dependent upon the
services of the investment manager. The use of a single advisor
could mean lack of diversification and, consequently, higher
risk.
--Investments in the Fund are subject to restrictions on
withdrawal or redemption and should be considered illiquid. There
is no secondary market for investors' interests in the Fund and
none is expected to develop.
-- The investment manager's incentive compensation, fees and
expenses may offset the Fund's trading and investment profits.
-- The Fund is not required to provide periodic pricing or
valuation information to investors with respect to individual
investments.
-- The Fund is not subject to the same regulatory requirements
as mutual funds.
-- A portion of the trades executed for the Fund may take place
on foreign markets.
-- The Fund and its investment manager are subject to conflicts
of interest.
-- The Fund is dependent on the services of certain key
personnel, and, were certain or all of them to become unavailable,
the Fund may prematurely terminate.
-- The Fund's managers will receive performance-based
compensation. Such compensation may give such managers an incentive
to make riskier investments than they otherwise would.
-- The Fund may make investments in securities of issuers in
emerging markets. Investment in emerging markets involve particular
risks, such as less strict market regulation, increased likelihood
of severe inflation, unstable currencies, war, expropriation of
property, limitations on foreign investments, increased market
volatility, less favourable or unstable tax provisions, illiquid
markets and social and political upheaval.
The above summary risk factors do not purport to be a complete
description of the relevant risks of an investment in shares of
BHCC or the Fund and therefore reference should be made to publicly
available documents and information.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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