Revealed – hedge fund caught short
Doom-monger Crispin Odey is the WORST performer in 2016 but don’t weep for him – he’s still worth £900m
CRISPIN ODEY – the charismatic hedge fund manager who correctly bet on the financial crisis of 2008 – has been caught short by the rally since the Brexit vote and is emerging as the worst performing European hedge fund manager so far this year.
Odey shot to fame after predicting the financial crash and making huge profits on collapsing bank shares. But his more recent forecasts of doom have so far failed to materialise and his flagship €730 million (£628million) fund is languishing at the bottom of the rankings.
HSBC said in a performance review released earlier this month that Odey’s European fund took the wooden spoon after plunging by 29.2 per cent between January 1 and July 29.
The news will be a devastating blow to the flamboyant fund manager, who once hit the headlines after spending £150,000 on a chicken coop – dubbed Cluckingham Palace – for his estate in Gloucestershire.
Odey is estimated, along with his fund boss wife Nichola Pease, to have a personal fortune of around £900million.
His recent troubles stem from his prediction that the global economy is heading towards a downturn that will devastate stock markets and be remembered for 100 years.
Odey’s main evidence has been that interest rates around the world are close to zero so central banks are running out of options to stimulate economies. In a letter to investors in January last year, he warned: ‘We used all our monetary firepower to avoid the first downturn in 2007-9, so we are really at a dangerous point to counter the effects of a slowing China, falling commodities and emerging markets and the ultimate First World effects. This is the heart of the message. If economic activity far from picks up, but falters, then there will be a painful round of debt default.’
Odey, who backs his calls by making investments in the stock markets, positioned his fund accordingly, betting that share prices would fall – known as shorting – and also placing complex currency trades.
There were times in the last year when Odey’s gloomy forecasts appeared to be looking prophetic, such as when world stock markets slumped 20 per cent between April 2015 and last February. The market sell-off after the referendum result on whether Britain should leave the European Union also looked to have been favourable for Odey. After the result was announced, he said: ‘I think I may be the winner.’
Reports suggested that Odey’s European fund rose by 15 per cent when stock markets nosedived in the days after the result of the Brexit referendum, boosting the fund by about £220million.
However, since the initial sell-off, stock markets – in particular the FTSE 100 index – have rallied. The irony will not be lost on Odey, a vocal backer of the campaign to leave the EU.
Markets are hovering around record levels. The FTSE 100 closed at 6916.02 on Friday, just 188 points short of its all-time high. Odey’s European fund is now down by almost 30 per cent – a shocking result considering his rivals have on average dropped in value by a relatively modest 5.95 per cent.
The Footsie rally has been driven by a combination of investor demand for firms that generate earnings abroad and the Bank of England’s announcement of a rate cut coupled with more quantitative easing last week. One rival hedge fund manager said: ‘Odey hasn’t appreciated the power of the central banks.’
Shorting shares and poor stock picking have not been the only issues. Odey’s European fund took a huge hit in May from his decision to short the Australian dollar against a long position in the US dollar.
Last year was not much better for Odey as his European fund slid by 12.8 per cent.
Odey – whose wife is descended from the family that founded Barclays Bank – is not the only highprofile hedge fund manager to preside over massive losses. The JabCap Global Balanced Fund, managed by Jabre Capital Partners, was down by 23.3 per cent by the end of last month, according to HSBC. Geneva-based Jabre Capital Partners was founded by Philippe Jabre.
Lansdowne European Equity fell by 17.7 per cent, according to the HSBC report. Lansdowne insiders said the performance had improved fractionally to a drop of 16.7 per cent since the report was compiled.
Lansdowne Partners is one of the City’s oldest hedge funds with $18billion (£13.9billion) under management. It was set up by Conservative Party donor Sir Paul Ruddock and Steven Heinz. It is now run by Stuart Roden and Peter Davies.
A spokesman for Odey did not return calls for comment.
Odey’s investments – although currently looking woeful – may yet come good as a slew of forecasters continue to predict a recession. A sharp downturn could quickly turn his loss into a gain.