This is a slightly longer version of an article published last night in the Telegraph’s Questor column.

A buying opportunity has opened in BH Macro (BHMG ), a £1.4bn hedge fund that seeks to do well when stock markets fall and that could offer a safe haven under a turbulent second Donald Trump presidency.

Since September last year, the shares have risen 14% to 396p but have continued to trade below the value of the company’s assets, at an average 10% discount in the past year. That means shareholders are not getting the full benefit of the portfolio run by Brevan Howard, the asset management firm co-founded in 2002 by Alan Howard, a billionaire donor to the Conservatives.

That’s a pity because since BH Macro’s launch in 2007 the underlying performance from Brevan Howard’s team of bond and currency traders has beaten the return of world stock markets, while shielding investors from their regular crashes.

Even over the last 10 years when the MSCI World index has soared 158.3% and BH Macro has lagged, growing its assets by 92.1%, data from broker Deutsche Numis shows it has done so with around half the volatility of the stock market benchmark.

Figures from the company claim it has delivered a smoother ride than rival ‘wealth preservation’ funds Ruffer Investment Company (RICA ) and Capital Gearing (CGT ).

Richard Horlick, chair of BH Macro, says this demonstrates the company’s ambition for its performance to be ‘a flight of stairs’, providing steady gains and avoiding sudden lurches downward.

There have been modest losses in only three of its 17 calendar years when its net asset value dropped 0.9% in 2015, 4.4% in 2017 and 1.8% last year.

The company also has an impressive record of delivering positive returns when the influential US stock market is stressed: making money in 18 of the 20 worst months for the S&P 500 when the index slumped 10%-15%.

When Covid struck and the US stock market plunged 12.5% in March 2020, BH Macro’s assets gained 14% and its shares leaped 18%. It went on to make 28% that year, repeating the feat in 2022 with a 21.9% return when stock markets were rocked by the Ukraine war, inflation and rising interest rates.

Unfortunately, recent shareholder experience has been less encouraging with the shares falling 23% from a 512p peak in September 2022.

At that time the share price towered at a 22% premium above asset value, indicating huge investor demand which the company met with a bumper £315m share issue at 413.5p in February last year.

Almost immediately, there were two successive setbacks. The collapse of Silicon Valley Bank and other US lenders in March 2023 saw the fund lose 4% that month as Brevan Howard’s bets on interest rate rises were confounded by the Federal Reserve’s response to the crisis.

More damaging was the merger the following month by wealth managers and leading shareholders Rathbone and Investec. This left the combined company with a 35% stake in BH Macro, well above the 30% threshold that would normally require a bid for the fund. While Rathbone-Investec got an exemption from having to do this, the expectation that it might want to halve the position and flood the market with shares hung over the stock, with the discount opening in summer last year.

Under shareholder pressure, BH Macro has stepped up share buybacks but these have failed to narrow the wide discount. As a result, the company is likely to have to hold a continuation vote early next year.

I’m not suggesting readers buy the shares to vote against the company, but should other shareholders do so, the company will wind up and investors get their money back at a narrower 2.5% discount.

This possibility should support the share price at a point when BH Macro is showing signs of life after a quiet year. So far this month it has made 9.25% from what could be dollar gains and increased market volatility after the US election, recouping a 2.9% loss in October and lifting this year’s return to 9.4%.

It could be that the uncertainty over Trump’s policies is just what Brevan Howard needs to find further profitable trades.

It’s also possible the company will offer a sweetener to encourage shareholders to vote for its continuation, such as a chance to sell some shares at a narrow discount. BH Macro would not comment but knows it cannot afford to be complacent. While Brevan Howard’s long-term record should ensure shareholder support, some investors are still annoyed with the fund manager for doubling its annual charge to 2% four years ago and reversing a previous cut in the fee.

Ongoing charges, including performance fees, are high at 2.2%, but are mitigated by the discount. The ability to buy the shares for 10% less than they are worth effectively pays for 4.5 years of Brevan Howard fees. Given their defensive potential, this looks a good bargain.

Buy BH Macro.

Closing price 402p

Key facts

Net asset value: 450p per share
Market value: £1.4bn
Year of listing: 2007
Discount: 10.6%
Average discount over past year: 11%
Yield: Nil
Most recent year’s dividend: Nil
Gearing: Nil
Annual charges: 2.2%

Any opinions expressed by Citywire, its staff or columnists do not constitute a personal recommendation to you to buy, sell, underwrite or subscribe for any particular investment and should not be relied upon when making (or refraining from making) any investment decisions. In particular, the information and opinions provided by Citywire do not take into account people’s personal circumstances.