“Bonds, the euro and gold.”
Accordingly, the 45-year-old, who ten years ago founded $950 million Odey Asset Management, one of Europe’s pioneer long-short firms, recently put fully half of his flagship Odey European fund into long-term U.K. gilts. As for European equities, he’s maintaining a small net short position. “These markets are very hard to read,” Odey concedes. “But bonds are giving a clear buy signal, and you have to grasp what little certainty you can.”
Being a little certain rather than a lot sorry has lately been working handsomely for Odey, who built a reputation for astute stock picking during the bull market, racking up average returns of close to 30 percent between 1995 and 2000. For 2001 Odey European was up 7.3 percent, compared with a 21.6 percent pratfall for the European stock market. And last year the fund was the top performer in the MAR/Hedge database of funds that invest in developed markets; its 12.9 percent gain contrasted quite vividly with the MSCI Europe index’s 30 percent drop. Bonds were a big component of the Odey portfolio in each of those years and are even more so today.
Yet fixed income hasn’t been fail-safe for Odey by any means. He made a disastrous leveraged bet on European government bonds in 1994, resulting in a nearly 35 percent loss for the year. He now employs strict position limits and risk controls.
