Eclectica’s Hendry Bets on Europe Freed From Germany's Shackles

Hugh Hendry, the hedge fund manager who made a fortune during the financial crisis, is betting low commodity prices and central bank stimulus will propel a recovery in Europe.

“Europe has been freed from the shackles of the German doctrine of economic policy by the decline in the oil price,” Eclectica Asset Management’s Hendry said in an interview after a speech in Oslo. “Europe is coming back to life.”

The investor, whose fund returned 31 percent in 2008, said he’s willing to look beyond a disappointing market reaction after the European Central Bank in December added less stimulus than many analysts had predicted.

“It took Europe too long but at least it has gotten there and has joined the orthodoxy of modern central banking,” he said. “Modern central banking has answers to resolve the issues which bedevil the European economy. Businesses are feeling better, there are weak pockets, of course.”

The main indexes are hiding the underlying improvements, he said, pointing to a 20 percent gain last year in Germany’s MDAX mid-cap index. It could add another 20 percent this year, he said.

Listed real estate in Germany is among the investments he’s looking at. Surveyors are valuing German properties on a 6.5 percent to 7 percent capitalization rate versus 10-year bonds below 50 basis points, he said. This means the rates are going to fall and capital values and stocks will be higher, he said.

“That seems like an idiosyncratic value opportunity that has nothing to do with these global strains like the oil price and China,” he said.

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