For Crispin Odey, revenge is a dish best served at 2 and 20 degrees.
The hedge fund manager, who suffered years of underperformance with many, including occasionally this site, predicting his demise when year after year Odey dared to “fight the Fed” and go all in on his bet for a “violent unwind” of the QE bubble, finally enjoyed a triumphant return in 2018 when, as we reported yesterday, his performance this year has been absolutely stellar, generating nearly double the return of his next closest peer with a 52% YTD return.
And so, in a characteristically brief note in the manager’s commentary to his Odey International Fund, Odey takes a well-deserved victory lap with an extra dose of gloating on the side, aimed at no one in particular yet targeting virtually every “market genius” who rode the central banks’ coattails for a decade and was a genius investor only to crash and burn in 2018, confirming yet again that the name “hedge fund” is – with a few very rare exceptions – nothing but a laughable oxymoron. We present it in its entirety below:
I have a lot of sympathy for your position, sitting on the other side of the desk. This is late cycle economics. Consumers are sated and over-borrowed. Companies have extracted all the margin they can and have leveraged themselves as well. Cheap money has spawned competition. Populism risks playing about with prices and property ownership. Recessions will not be altogether unwelcome given that they deal with the problem of rich and poor and young and old. The rich lose money which pleases the poor. The old lose their jobs and the young are the first to be reemployed. Without recessions this redistribution has to be done through taxation and legal theft.
In all of this there are few people doing well. ETF’s, Quant funds, hedge funds, stock pickers, private equity and distressed bond funds offer little diversification and little protection, but to invest with us you are having to disown the majority of your portfolio. Do you want to own something which if it does well merely highlights how badly your conventional portfolios are performing? The simple answer is ‘no!’ It is just too difficult holding two contrary ideas in one’s head. Better to take a longer term view which allows you to lose a bit of money in the short-term. But my point to you is that saving your bacon in the bear market is only half our skillset. By far the most interesting and rewarding part of what we do is when we invest at the bottom. That is really when you want to be invested in our funds.
Odey’s revenge is only lukewarm, however, because as MarketWatch reported earlier, Odey was his profits more than halved for the year ending April 2018 as operating profit has slumped to £8.7 million (roughly $11 million) from £18.6 million, according to the latest accounts for Odey Asset Management, which were published Friday at Companies House. The firm’s parent company, Odey Asset Management Group, saw revenue fall from £47.5 million to £31.2 million for the year.
The reason for this slump: a rise in outflows as many of the fund’s investors lost patience with Crispin’s truly contrarian investing strategy. A note in the document, seen by MarketWatch, said: “Although the year shows a fall in revenue, this was in line with expectations based on net outflows of assets under management.”
Indeed, during its financial year Odey saw the closure of two funds, Odey European Absolute Return Fund and Odey European Allegra Fund, which closed in April 2017. As a result, total AUM as of this April were $5 billion, down from $6.1 billion in 2017, a number which likely only declined heading into the market’s all time high on Sept 20.
The fund partnership had around 18 members during the year, who shared £8.6 million, which was down from £17.8 million. The member with the largest entitlement, thought to be Crispin Odey, saw his income fall from £5.5 million to £1.4 million over the period.
Of course, this all turned in recent weeks when Odey made an estimated £220 million in the wake of the Brexit vote, thanks to his big bets against the U.K. economy post-Brexit; Odey Asset Management declared short positions worth a reported £149 million against a raft of retailers and consumer-facing firms.
The accounts for Odey Asset Management also show performance fees increased to £385,000 from £60,000 in 2017. But this was far short of the £19.2 million in performance fees recorded in 2016.
Expect these numbers to reverse promptly if Odey can sustain his stellar 2018 performance into next year.
Finally, for those wondering, here are Odey’s Top Holdings as of Nov 30:
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