Oh dear, Crispin Odey. Hard times for the flamboyant hedge fund tycoon

The funds run by the Brexit-backing money manager have lost a fifth of their value in just two weeks. And this follows a 13 per cent fall last year. Michael Bow looks at the big bets that have blown up in Crispin Odey’s face

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The Independent Online

In late 2010, a new food shop called Union Market opened in the Grade II listed ticket hall alongside Fulham Broadway tube station. 

It was based on the organic grocery store concept pioneered by the US group Whole Foods. But there was one very unusual feature: an “Odey” sausage named after the larger than life hedge fund tycoon Crispin Odey.

Mr Odey was a prominent financial backer of the venture and launched the sausage, made from pigs raised near the billionaire’s country pile, to signal his investment. But despite the fanfare and the hedge-fund backer, the shop went bankrupt shortly after. Not for the first time, the outspoken tycoon’s unique mixture of hubris and investing power had failed to pay off.

Fast-forward four years and the spotlight is again on Mr Odey’s investment decisions – but this time it’s his investment of clients’ money rather than artisan cheese sales that are at risk.

Long considered the poster boy of Mayfair’s gilded hedge fund set, Mr Odey is facing questions from investors about big swings in his fund’s performance, after a string of bets started smelling worse than an unsold crate of Odey bangers. Odey European Inc, his primary fund, has lost 25.5 per cent so far this year, with most of the losses suffered in a calamitous two weeks at the start of March, when the fund slumped 22 per cent.

This puts March 2016 on track to become the worst month of losses for the fund since it was launched in 1991, surpassing the previous record set last April when it fell by 19.5 per cent. The loss is all the more brutal given the fund had returned 14 per cent in the first two weeks of the year.

While supporters may point to the short-term nature of the performance, Mr Odey faces an uphill struggle to get back into positive territory for the year. For 2015 as a whole, Odey European lost 12.8 per cent and a second year of losing money will heighten the pressure on the fund.

Investment consultants, who influence how big-ticket investors such as pension funds invest their billions, frown upon successive years of underperformance from hedge funds, which charge much higher fees than ordinary mutual funds.

Another big hedge fund, BlueCrest, led by billionaire trader Michael Platt, effectively closed down last year after investors headed for the exits when consultants’ views turned negative. 

BlueCrest’s flagship international fund recorded three consecutive years of losses, triggering consultants telling clients to pull their cash from the fund. Funds under management collapsed from $36bn (£25bn) to just $8bn.

While there is no sign of this happening to Mr Odey – assets are still relatively healthy with the European fund running $1.2bn and the firm as a whole with $13.4bn – consultants will be watching his performance much more closely from now on to see if he has lost his touch.

Since coming on to the public radar in the late 1990s, Mr Odey has been a lightning rod for criticism and fascination due to his easy charm, outspoken views, and flirtation with politics (he has been a big Tory donor and has backed the Brexit camp in the forthcoming referendum).

But his contrarian views also have a downside, underscored by the big bets which have weighed down his fund. 

Unlike many “long only” mutual funds, hedge funds can take negative views on stocks by betting against companies. His firm often lays big bets on FTSE-listed groups hoping they plummet in value.

This year Mr Odey made bets against groups such as emerging markets fund manager  Ashmore, miner Anglo American, oil firm Tullow and property group Intu. Unfortunately, all of these soared over the past month. 

Tullow Oil is up 38 per cent, while Ashmore has risen more than 30 per cent. Anglo American is also up 26 per cent and Intu is 10 per cent higher – leaving Mr Odey well out of the money.

His bond trades have also taken nasty turn. One of his biggest bets was against Japanese debt. 

About a quarter of the fund was reportedly invested in shorting the 10-year Japanese government bond, hoping it would fall in value. Last month the Japanese central bank decided to cut interest rates into negative territory to minus 0.1 per cent. The result, unfortunately for Mr Odey, was that the price of its sovereign bonds rose.

Another big trade was on a rise in value of Australian government bonds. Mr Odey reportedly ploughed about a fifth of the European Inc fund into Aussie bonds. But the price again went the wrong way. His long held short positions in Chinese-related investments and luxury goods are also not looking to healthy after the market has stabilised.

Mr Odey is on the back foot. The days when his record sizzled like those eponymous sausages suddenly seem rather distant.

The failed bets: What went wrong

1. Betting on a fall in the value of Japanese bonds – they have risen in value

2. Betting on a rise in the value of Aussie bonds – they have fallen

3. Betting against China-related investment stocks – they have stabilised 

4. Betting on the share price of Ashmore, Anglo American, Tullow and Intu to fall – they have all surged