Perma-Bear Odey Says Market Rout Not Over as Funds Get Reprieve

  • Odey’s flagship fund gains 7%, anonther one rises 12% in rout
  • ‘I think we are starting a nasty bear market’ says Tim Bond

Some of the hedge fund industry’s most gloomy managers are finally having something to cheer about.

Crispin Odey, who’s lost money for the past three years betting on a market crash, gained about 7 percent in his flagship fund since the market sell off started last week, according to a person with knowledge of the matter who asked not to be identified discussing non-public information. His colleague at Odey Asset Management, Tim Bond, made about 12.5 percent in another fund before giving up some gains as U.S. markets started to rebound Tuesday.

Crispin Odey

Source: Odey Asset Management

While the returns since last week will do little to reverse a 65.5 percent loss in Odey’s European Inc. fund and 41 percent decline in Bond’s Odyssey Fund in the three years through 2017, they differentiate the money managers from peers who were caught off guard. Both investors warned on Wednesday that the selloff probably isn’t done yet.

“It’s probably not all over,” Odey, who has used his investor letters to warn of a crisis almost on a monthly basis, said in an interview from London, where his firm is based. “Part of what happens in the bear market is you have to trap people the wrong side of it when it starts. You have to have people who have just arrived thinking it’s going to be fun.”

Odey, whose notable predictions include a 2016 warning that U.K. stocks could plummet 80 percent (they returned 8.7 percent since then, including dividends), said what happened in the rout was probably driven by automated trading programs, rather than managers deciding to get out of equities. The real issue for investors is whether they think inflation is now finally returning after years of massive monetary stimulus, which would fuel further declines in stock and bond markets.

“If that all happens, we could be at the beginning of a bear market,” Odey said. “What we can see is that this market has many of the same characteristics that you had in the 1970s.”

The rout erased $3 trillion erased from equity markets and caused losses at investment firms from Man Group Plc to Lynx Asset Management. An implosion of bets against stock-market volatility led Credit Suisse Group AG and Nomura Holdings Inc. to liquidate two investment products, while more than a dozen others were halted after their values sunk toward zero.

“This particular phase is not over,” Bond said. “Longer term, I think we are starting a nasty bear market in bonds, equities and credit.”

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