Crispin Odey’s bearish bets pay-off. Crispin Odey’s flagship €173m Odey European fund has returned 19.9% in the year to date.

The prominent Brexit supporter these days is no doubt laughing quietly all the way to the bank.

Crispin Odey’s bearish bets pay-off which entailed shorting a string of assets including UK government debt (gilts) and the pound sterling has earned him the heavyweight title of top-performing hedge fund managers this year

“Crispin Odey’s bearish bets pay-off. His flagship €173m Odey European fund has returned 19.9% in the year to date

RAY DALIO

While Crispin Odey rejects Brexit millionaires investigation he is indeed amongst the top UK financiers profiting from the Brexit turmoil. Aiding and abetting the stupidity and then profiting from it does have a bit of a rogue element to it 

But anyway in a money world all that counts is that Crispin Odey’s bearish bets pay-off.

Odey European fund with its 19.9% return year to date is making the bearish fund attractive to investors like bees round a honey pot.

Crispin Odey, the permabear investor is all in, betting his entire fund on a spectacular market collapse.

So outsized bearish bets on equities and government debt have returned the London based money manager stella returns to date.

“Crispin Odey, the permabear investor is all in, betting his entire fund on a spectacular market collapse”

 

Crispin Odey’s bearish bets pay-off on UK gilts is likely to continue raking in profits going forward

The Brexit turmoil is making the sale of gilts, which is carried out by the UK Debt Management, challenging to say the least. The UK needs to raise on the competitive international bond market approximately GBP 11 bn every month to keep the lights on. Moreover, to make matters worse almost 100 billion pounds ($128 billion) of government bonds will mature in the next fiscal year. 

What this means is that a massive gilt auction with few bidders could be coming soon

Unless other central banks step up their purchase of gilts, prices could start falling in a meaningful way sending yields soaring and increase the risk of a sovereign default. That could leave the already demoralized UK going cap in hand to the IMF for a rescue. Could this happen? Indeed, in the 1976 IMF crisis James Callaghan’s Labour Party government was forced to borrow $3.9 billion from the IMF, the largest ever, to keep the lights on. 

With GBP collapsing on the foreign exchange no private investor worth his salt is going to enthusiastic buy gilts. 

a new $2.3bn macro hedge fund run by billionaire British investor Alan Howard, comprising on several short positions gained 36.7 percent in May following years of posting mediocre returns and suffering large client withdrawals

Crispin Odey has made a bet against UK government debt equivalent to 147.4 percent of his fund’s net asset value

He has also taken a position against Japanese government bonds equivalent to 43.6 percent of his fund’s value.

Tesla, the highflying US carmaker also contributed to Crispin Odey’s bearish bets pay-off

Tesla stock has fallen 11 percent in the past 12 months. Overall the auto sector is struggling with lackluster sales. 

But Crispin Odey’s bearish bets pay-off also has much to do about timing and being solvent long enough, having deep pockets and patient investors willing and able to wait it out. 

It was not long ago that Crispin Odey’s ill-timed short bets saw the Odey European fund’s value crumble by 60 percent from its peak three years ago.

Sometimes the worse performing investment strategy one year end up being the most profitable play the following year.

Crispin Odey’s bearish bets pay-off is a growing trend as a string of heavyweight investors start turning bearish

For example, a new $2.3bn macro hedge fund run by billionaire British investor Alan Howard, comprising on several short positions gained 36.7 percent in May following years of posting mediocre returns and suffering large client withdrawals. 

Third Point, the New York-based fund founded by Dan Loeb, has also been increasing its short positions. Mr. Loeb, in his first-quarter letter to Third Point investors, said he did not believe that a recession was close, but “there is a concern that it is getting closer”. The fund took about 15 percent of exposure out of its long book and upped its short positions to about 25 percent of the firm’s assets under management.

“Conventional thinking does not believe that inflation can resist a recession. That simple misbelief could be costly” – Crispin Odey

Ray Dalio’s Bridgewater Associates, the biggest hedge fund in the world, has been growing increasingly bearish this year and has also been increasing its short exposure

Ray Dalio, in posts on his LinkedIn page “bigger impending conflict”, triggered by growing income inequality, economic stress, populism and shifting power in the world. “At such times,” he wrote in late March, “I believe that it is especially important to keep one’s portfolio liquid [to be flexible] and diversified [to not have concentrated risks].” 

But jumping the gun on short bets can also be costly as David Einhorn’s Greenlight has discovered

David Einhorn’s Greenlight argued that many technology stocks are overvalued and have bet against them. His fund has lost 14.57 percent up to end of April, making it one of the worst-performing large hedge funds in the world this year. 

What then is the rationale behind Crispin Odey’s bearish bets pay-off trade? 

Crispin Odey view is one echoed by several investors. Crispin Odey has long argued that years of experimental monetary policy by central banks will eventually result in a severe market shock and explosion of inflation. 

In his most recent letter to clients, Crispin Odey cited that protectionist US trade policy was likely to exacerbate the problems.

“All of this is taking place when stock markets are very expensive and bond markets from Japan to the UK trade on a 10-year yield 200 basis points under inflation” Crispin Odey told investors in his most recent letter.

“Conventional thinking does not believe that inflation can resist a recession. That simple misbelief could be costly” he added.

TRADING SOFTWARE

Dan Loeb targets Sony. Dan Loeb is an activist investor and founder of Third Point, which oversees about $14.5 billion in assets.

Last year the activist investor viewed Campbell soup as a bargain when Third point reported that the soup maker could fetch a takeover value of $52 to $58 per share.

A year later and the activist investor Dan Loeb targets Sony

Dan Loeb's activist hedge fund Third Point is raising an investment vehicle to generate between $500 million and $1 billion so it can continue to buy Sony shares, according to a recent report in Reuters.