Brevan Howard Absolute Return Government Bond Fund

The fund is run by Adam Purzitsky and Paul Shanta who also manage pari-passu a sleeve of the BH Alpha Strategy Master fund ($400m allocation with 1.5x leverage, as at Nov-20). The product is at its third iteration (previously Ignis and Old Mutual) and has remained consistent ever since. It is an absolute return government bond strategy that aims to generate strong risk-adjusted returns in all market conditions with zero/low correlation to traditional assets classes. The portfolio is focussed on the most liquid, high quality end of the DM fixed income spectrum and does not take credit risk of any sort. The fund generally only invests in G-10 government bonds, those bonds that are deemed to be default-free (AAA sovereign and supranational issuers), and related securities such as interest rate swaps, inflationary bonds and inflation rate swaps. A small component of the portfolio can be invested in G-10 FX crosses (max 25% of active risk by mandate - usually about 5%). 85-90% of the fund’s capital is unencumbered effectively replicating the liquidity of a portfolio of treasuries (as well as its default properties). The asset allocation process is largely informed by the PMs’ understanding of major economic and financial market forces and the interactions between the larger economies in the world. This overarching long term global macro view is then broken down into 4-5 major themes (US, Eurozone, Asia ex Japan, Japan) which are expressed at the portfolio level through 15-20 exposures. These expressions are either medium term (trading macro ‘value’ dislocations) or short term (trading ‘liquidity events’) in nature, with an average holding period ranging from a week to a few months.