Crispin Odey hit in volatile September for hedge funds
UK manager lost 12.7% in European fund as stock and bond moves made for challenging month
Hedge fund manager Crispin Odey is among managers nursing losses after a choppy few weeks that saw large moves in bond and stock markets.
Mr Odey, founder of London-based Odey Asset Management, lost 12.7 per cent in September in his European hedge fund, according to numbers sent to investors and reviewed by the Financial Times. That left his fund down 18.1 per cent for the year.
September proved a major challenge for hedge funds, many of which have been riding rising stock and bond markets this year.
A violent rotation out of shares that had been performing well and into cheap value stocks — which had previously largely been neglected in favour of faster-growing companies, for instance in the technology sector — hit some equity hedge fund managers. There was also a spike in crude prices mid-month following strikes on Saudi oil processing facilities, that was quickly reversed.
Mr Odey’s fund has been running bets against financial stocks including insurer Lancashire Holdings, the fund’s biggest equity market position, according to a letter to investors seen by the FT. Financials rose strongly in September, however, and Lancashire’s shares jumped nearly 9 per cent. Meanwhile, the British pound, against which Mr Odey has also been betting, climbed against the dollar.
Offsetting some of the losses was Mr Odey’s large bet against Metro Bank, whose shares plunged after the lender pulled a £200m bond offering. An Odey spokesman declined to comment on the fund’s positioning.
Mr Odey’s fund endured three calendar years of losses, including a drop of nearly 50 per cent in 2016, before rebounding 53 per cent last year, when it was one of the world’s top-performing hedge funds.
This month, it had regained 4.5 per cent as of the middle of last week, reducing year-to-date losses to 14.4 per cent.
September also saw large moves in government bond markets. US 10-year Treasury yields soared from 1.51 per cent to 1.91 per cent by the middle of the month after a bout of improved economic data, before falling back as concerns about the growth outlook returned. Yields fall as prices rise.
Among hedge fund strategies hit were computer-driven trend-following funds, which have been running large bets on falling bond yields, according to numbers sent to investors.
Man Group’s AHL Diversified lost 7 per cent during the month, reducing gains this year to 14.6 per cent, while its Evolution fund fell 4.3 per cent, leaving it up 8.9 per cent. New York-based Gresham Investment Management’s Alternative Commodity Absolute Return fund fell 7.9 per cent, leaving it down 7.7 per cent for the year.
Among macro managers, Brevan Howard, run by billionaire trader Alan Howard, was hit after a strong run of performance. The fund, which had been betting on falling bond yields, lost about 2 per cent, reducing gains to about 8 per cent.
Some funds were able to profit from the sharp market moves. Renaissance Technologies, the $60bn hedge fund business founded by Jim Simons, was up 2.5 per cent in September in its Institutional Equities fund, bringing its year-to-date performance to 10.5 per cent.
One investor in the quant hedge fund said it had benefited from being overweight utilities and from its investments in sectors such as healthcare and materials.
Greenlight Capital, the value-focused hedge fund founded by David Einhorn, also did well, posting an 8.4 per cent return in September. The fund is up 24 per cent this year after a brutal end to 2018 that saw it post its worst-ever performance.
Some funds were also able to profit from bargains they picked up during the market fallout from Argentina’s president Mauricio Macri’s surprise defeat in primary polls in August. London-based Promeritum Investment Management, for instance, made gains on Egyptian and Ghanian bonds. It was up 1.2 per cent last month and is up 8 per cent this year.