Brexit-backer Crispin Odey Sends Investors to Exits with Losses
With a negative 35 percent return so far this year, the U.K. hedge fund manager finds himself at the bottom of the table and shedding assets.
These should be the best of times for Crispin Odey. The outspoken founder and CIO of hedge fund firm Odey Asset Management was an enthusiastic backer of the Leave campaign in the U.K.’s referendum on whether to remain in the European Union. And when voters opted for Brexit in the June ballot — a decision that confounded market expectations — Odey was one of a handful of managers who were able to capitalize as the pound collapsed and stocks briefly slid. He made gains betting against homebuilder Berkeley Group Holdings, among others.
Brexit aside, however, 2016 has been among the worst of times for the 57-year-old manager. His flagship Odey European fund, which invests long and short in equities as well as in currencies, commodities and bonds, was down 35.04 percent for the year as of mid-September, making it the poorest performer in the HSBC Alternative Investment Group hedge fund performance review universe. This has been a tough year for investment managers of all stripes, but Odey truly stands out. The second-worst performer, a hedge fund run by Wellington Management Co., was down 22.98 percent, according to HSBC. Hedge Fund Research’s HFRI Fund Weighted Composite Index was up 3.46 percent year-to-date through the end of August.
This year’s setback hasn’t come in isolation. Odey’s fund lost 21.73 percent in 2015, much of it from a bad bet on the Australian dollar, and 7.37 percent in 2014. The run of poor returns has caused some investors to lose patience. The fund had €730 million ($819 million) in assets at the end of March, according to HSBC, down 73 percent from €2.7 billion a year earlier. Odey was unavailable for comment, staff at his office in London’s swanky Mayfair district said.
As Institutional Investor reported in its June 2015 International Edition cover story, “Odey’s World,” investors in Odey European are used to roller-coaster rides. The notoriously opinionated, contrarian hedge fund manager made his investors more than 100 percent from 2007 to 2009, when, early to spot the issues that led to the great financial crisis, he shorted financial stocks in 2007 and 2008, then changed tack and made money when bank stocks rallied in 2009. His recent stumble is reminiscent of a near-fatal misstep earlier in his career: a bad bet on U.S. interest rates that lost 50.64 percent between January 1994 and July 1995 and almost caused his firm to founder.
“I make money very quickly in surprising moments,” Odey told II in the June 2015 story. “I am also quite good at losing money.”
This time around, Odey has racked up losses largely by being short equities. He believes stocks are overvalued and primed for a fall. So far, however, with the exception of a brief stock market wobble in the immediate wake of the Brexit vote, that bearish view has not been proved right.
The hedge fund manager told II last year that his setback in the 1990s, when he was running virtually a one-man shop, was a lonely experience. This time he has a number of other funds and fund managers within his firm to keep him company, and at least one is doing well: The Odey Absolute Return Focus Fund — managed by the firm’s co-head of research, James Hanbury — is up about 4 percent year-to-date, according to sources. Like Odey, Hanbury was a winner coming out of Brexit — he’d bet on the pound to decline.
Odey manages only about half of his firm’s $9 billion in assets, so Odey Asset Management is better positioned to endure its founder’s losing streaks. But if Odey European’s performance continues to slump, the annual Christmas party — a highlight on the firm’s social calendar — may be short on merriment.
Follow Imogen Rose Smith on Twitter at @imogennyc.
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