Crispin Odey’s Unfulfilled Prophecy Cuts Hedge Fund Value By A Third

Odey Asset

Odey Asset Management lost over 30% in the period of just 4 months in 2016.

Crispin Odey, in 2015, predicted a global economic deterioration that would be remembered in a hundred years. He had carried over his bearish views to the first four months of 2016, which led to his Odey European Fund losing as much as 31.1% in value, dropping to only €729 million. This result came as a disappointment to investors considering Odey’s fund had been delivering annualized returns of 12.37% since 1991.

Odey’s losses came after a market recovery, which the Odey Asset Management betted against; Odey has been critical of the central banks’ strategy of quantitative easing. In his February investment update, he said that the record low rates have transformed the market into a battlefield. “Several years of watching central banks responding to ever falling productivity numbers by reducing interest rates have shown that they can effect asset prices with their actions, but that not only do they have almost no effect on economic activity, but they positively damage it.” His disbelief in the policy had made him enter into big bets against currencies and equities.

He maintains his view in his March 31 letter to investors. “QE is merely encouraging misdirected investment. Remember it was Keynes, the architect of [central bank] thinking, who said, ‘It is good for people to travel, goods to travel but not for savings to travel.’ The disconnect between travelling and arriving may be coming home to roost. It will make the retreat from Moscow appear painless.” Odey believes, QE leads to misallocation of capital to China and the emerging markets, areas that he had been betting against.

Wanting Britain to break free of the European Central Bank’s jurisdiction, Odey is one of the strong supporters of Brexit.

His miscalculations of the market direction affect not only his investors, but his personal wealth, severely. Mr. Odey went from being a billionaire to only a multi-millionaire in the span of a quarter. He lost £200 million, leaving him with a net worth of just £900 million. This is also in addition to him getting his paycheck cut by half last year, from £31.8 million to only £16 million, when his fund gave one of the worst performances for hedge funds in 2015 and annual profits dropped by more than half, coming in at only £84.1 million from £174.2 million in 2014. The 2015 loss was also due to his bearish outlook on currency, particularly the Australian dollar.

Despite losses, Odey continues to sponsor the Vote Leave (for Brexit) group and financially support Zac Goldsmith for London mayor.

According to the Sunday Times Rich List, Odey is not the only one who grew “poorer”. Alan Howard of the Brevan Howard fund lost £460 million in 2015. A luckier one, Michael Platt became Britain’s richest hedge fund manager when he added £600 million under his name, bringing his total wealth to £2.1 billion. Platt’s BlueCrest Capital mostly manages his own money.

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