Hedge funds made millions as the pound plunged

HEDGE fund managers including Crispin Odey made a killing by betting against the pound as the Tories lost their majority.

The City regarded the general election as a foregone conclusion, with many opinion polls and betting markets pointing to a solid Tory win.

But although few firms are thought to have actively bet on the result in advance, many were already gambling that sterling would drop due to Brexit. As the results filtered in and the currency plunged, they are thought to have turned a huge profit.

Billionaire Odey, 57, has long bet against the pound through his firm Odey Asset Management – making him a big winner from PM Theresa May’s poor showing at the polls. ‘I was expecting to lose a lot of money because I’d hoped she might win,’ he said.

‘It all gets very complicated without a majority.’

Odey was not the only winner as the pound fell 2.5pc against the dollar to $1.2635 and 2.3pc against the euro to €1.1289 before recovering some of its losses.

‘By and large, if you were a hedge fund betting against the pound you would be pretty happy right now,’ said Mark Dampier of Hargreaves Lansdown.

The slide in the pound pushed the FTSE 100 index up one percentage point to 7527.33, while the more UK-focused FTSE 250 rose 0.1pc.

But sectors with strong links to the British economy came under pressure. Housebuilders were among those in reverse, with Crest Nicholson down 5pc, Berkeley Group off 3.5pc and Taylor Wimpey 3.3pc lower.

Banks also took a knock, with RBS down 2.5pc and OneSavings Bank off 2.9pc, while High Street giants M&S and Next both lost about 2pc of their value. Martin Gilbert, of Aberdeen Asset Management, said: ‘Markets don’t like uncertainty at the best of times, and sadly we’ve got uncertainty.’

US finance firm BlueBay Asset Management went short on sterling last month, with Allianz Global Investors and Bank of Amer- ica Merrill Lynch also gambling on a drop. The US Commodity Futures Trading Commission said there were 29,700 more short positions in the sterling market than long ones on Friday last week, up 23,900 in a week.

A short position involves betting on a fall in the pound while a long one gambles that it will rise.

Perhaps the biggest money made on the night came not from giant finance firms, but independent currency traders who were able to react quickly.

CMC Markets had its best night this year. Analyst Michael Hewson said: ‘The turnover on sterling was phenomenal – ten times the normal amount.’

But it is not clear which way sterling will go now. Many hedge fund bosses expect a further dip.

But Dampier said the pound might rally if the Government had to compromise on Brexit, adding: ‘The pound has got to a point where you can say it’s undervalued. I’m not saying that means it goes back up straight away, but it kind of limits the downside.’ by James Burton and Hugo Duncan