Odey Hedge-Fund Assets Dip 60% as Clients Shun ‘Bitter Pill’By
Assets under management at Crispin Odey’s flagship hedge fund have plunged 60 percent this year after clients demanded their money back as his bearish bets fell apart in the wake of central-bank interventions and near-zero interest rates.
The Odey European Inc. fund held 422 million euros ($468 million) at the end of September, down from 1.1 billion euros at the start of the year, according to investor documents seen by Bloomberg News. The fund lost 37.5 percent during the period and 43 percent through Oct. 14. A spokesman for Odey Asset Management declined to comment.
“He still has a good track record and he is a contrarian,” said Laith Khalaf, senior analyst at Hargreaves Lansdown, which sells funds to individuals in Britain. “Investors do need to take that on board, though this year so far is no doubt a bitter pill to swallow.”
There’s been a widespread backlash by investors this year against poor returns and the high fees charged by money managers. A total of $60 billion has been pulled from hedge funds and cash is being moved away from big-name traders to computer-driven funds, where algorithms are employed to bet on macro-economic trends.
While Odey’s company manages more than $8 billion, placing it among the largest hedge-fund firms in Europe, it’s the rollercoaster returns of his own European Inc. fund that attract attention. This year’s losses follow an almost 13 percent decline in 2015. Still, it’s up more than 900 percent since it started in June 1992, and in that time annual gains of more than 50 percent have been achieved four times.
“If you have been invested with someone like him for 10 years, you are still in the money and hope that he could recover,” said Jacob Schmidt, chief executive officer at investment advisory firm Schmidt Research Partners.
Hedge funds gained 4.2 percent on average through September this year, largely because of improved returns in the third quarter, according to Hedge Fund Research Inc.
Odey, 57, has acquired a colorful reputation among London’s hedge-fund managers. In 2012, he got planning permission to build a 130,000-pound Palladian-style chicken house on his country estate a two-hour drive northwest of London. He supported the U.K.’s decision to leave the European Union and remains a vocal critic of central banks’ intervention in the economy.
Losses are accumulating at his fund as bets against equity markets fail to pay. The S&P 500 Index has risen 2.6 percent this year, while his biggest short bet by value -- Tullow Oil Plc -- has rallied almost 60 percent.
“Bull markets do not die of old age. They are murdered by central banks. How far away we are from that old adage," Odey wrote to investors in his February newsletter.
Thursday proved to be another rough day after a court ruled that the U.K. must hold a vote in Parliament before starting the two-year countdown to Brexit. Most of his 18 short bets rose, according to data compiled by Bloomberg. Lancashire Holdings Ltd., Odey Asset Management’s fourth-largest short position by value, gained the most in eight years as the company posted better-than-expected profits.
In a letter to investors last week, Odey predicted that U.K. stocks could plummet 80 percent.
“An 80 percent fall suggests a pretty seismic collapse in capitalism," Hargreaves Lansdown’s Khalaf said. "In that scenario, I’m not sure you’d want to be invested in anything apart from baked beans and bottled water."