Crispin Odey loses 20% for second time in a year
To lose a fifth your client’s money in one month may be regarded as misfortune. To do it twice in 12 months could start to look like carelessness. Crispin Odey, the outspoken London hedge fund manager, made a 22 per cent loss in his €1bn Odey European fund in the first two weeks of March as a number of big bets went against him.
The loss follows Mr Odey, a stock picking specialist, having lost 19 per cent last April speculating on the value of the Australian dollar. That blow resulted in Odey European losing 12.8 per cent for clients in 2015 and being one of the worst-performing large hedge funds in the world that year.
Mr Odey’s second large monthly loss in less than a year has been driven by several large macro bets, driven by a deeply bearish view on the Chinese economy and emerging markets, that have turned against him. Odey European is now down by 25.5 per cent so far for 2016.
According to recent fund documentation the Odey European fund has put 25 per cent of its total exposure into betting that the value of the Japanese 10-year government bond will fall. Over March the yield on 10-year Japanese government debt — which moves inversely to their price — dropped to the lowest level on record, meaning Mr Odey’s trade is likely to have suffered large losses.
A further fifth of the fund’s exposure has been put into Australian government bonds, another trade likely to have caused losses over this month as the Australian 10-year yield rose, meaning the value of the bonds dropped.
The losses suffered by Mr Odey’s European fund have been heightened by a number of his largest bets against specific companies share prices turning sour since the start of the year.
According to data from UK regulatory data Odey Asset Management has sold short 6 per cent of the emerging market-focused fund manager Ashmore, whose shares have surged 25 per cent in March. Shares in the miner Anglo American, another large Odey short, have more than doubled since the middle of January.
A more successful trade for Mr Odey has been betting almost a third of the value of the fund on gold rising, with spot gold having gained 18 per cent so far this year.
In a note to investors Mr Odey wrote how “It is getting interesting”, going on to predict a recession in China. “What China needs given the overinvestment in non-productive assets estimated at $1.7tn a year for several years, is a deep recession, the writing off of several trillion dollars of debt and the refinancing of the banking system. You cannot do all that without interest rates at almost zero and a weak exchange rate.”