Odey funds make strong gains through coronavirus sell-off
Hedge fund manager’s bearish stance pays off for investors during pandemic
Two mutual funds run by Crispin Odey’s investment business delivered eye-catching results in March when financial markets plunged as a result of the coronavirus pandemic.
The £294m Odey Swan fund, a long-short equity strategy overseen by high-profile hedge fund manager Mr Odey, posted a 19.8 per cent return in March, taking its performance over the first quarter to 8.3 per cent.
The £73m Odey Odyssey fund, a macro strategy that bets on broad market trends and is managed by Tim Bond, delivered a 15.8 per cent return last month, raising its first quarter performance to 27.4 per cent, according to data from Kepler Partners, a fund research and distribution company.
Both funds have this year outperformed the Odey European fund, one of Mr Odey’s flagship hedge fund strategies, which was up 6.5 per cent at the end of the first quarter after a 21 per cent gain in March.
The Swan and Odyssey funds were overwhelmingly bearish on equities during the long bull run, and dropped significantly between 2016 and 2018. But they have been boosted by crashing stock markets this year.
Odey Asset Management declined to comment.
Many hedge fund managers offer versions of their headline strategies that conform to European mutual fund rules allowing investors to trade daily instead of requiring them to lock up their cash for an extended period. Known as liquid alternatives, these Ucits funds have enjoyed strong sales over the past decade and developed into a sector with about £220bn in assets at the end of 2019.
The Ucits liquid alts sector delivered an unweighted average loss of 5 per cent in March, taking its decline over the first quarter to 6.6 per cent, according to Kepler’s analysis, which covers about 90 per cent of the European alternative Ucits market.
“The volatility in March wiped out gains that many liquid alts had made earlier in the year,” said Georg Reutter, a partner at Kepler. “Sectors such as merger arbitrage and event driven strategies that historically have been very consistent performers really gapped out in March.”
He added: “Managers that adopted more defensive strategies performed better but there was very wide performance dispersion between funds in each subsector.”
LGT Capital’s Dynamic Protection fund, run by the alternative manager owned by the Princely House of Liechtenstein, delivered a return of 20.7 per cent last month, making it the best performer in March.
The worst performer in March was H2O Asset Management’s Vivace fund, down 63.9 per cent last month. H2O, a subsidiary of French bank Natixis, warned clients last month that its funds face “surprisingly large” losses because of bets on bonds and currencies that had soured. H2O’s Allegro, Global L/S Opportunities and MultiReturns funds lost 44.9 per cent, 35 per cent and 25 per cent respectively last month.
Kepler’s analysis showed that the Madrid-based boutique Quadriga Asset Manager’s Igneo fund, a multi-asset strategy, ranked as the best performer of the year with a return of 42.6 per cent.