Crispin Odey cashed in on the 2009 crash and now he's made £115m from this crisis
It wasn't the first time Crispin Odey has been accused of
crying wolf. Over the past five years, Britain's best-known hedge fund boss has
repeatedly predicted a major stock market crash.
At one stage, the 61-year-old multi-millionaire seemed so
convinced of impending doom that he even faced suggestions (which he dismissed
as 'absolute rubbish') that his outspoken support for Britain leaving the EU
was motivated by a sinister desire to cash in on plunging shares.
But the post-Brexit Armageddon never came, with the market
hardly blinking when the UK finally left the EU on January 31. By the end of
February, his flagship Odey European Fund was 12 per cent down for the year. So
much for the wolf at the door.
No wonder, then, that critics thought Odey was up to his old
tricks when The Mail on Sunday reported on March 1 that he was predicting that
the coronavirus crisis would slash the FTSE 100 from 6,581 to 5,000 before the
year was out. The market had just fallen 11.1 per cent in a week and some
traders were talking about a buying opportunity.
Well, just three weeks later, Odey has finally been proved
right – and in spectacularly profitable fashion. Not only did the FTSE sink
briefly below 5,000 last week before settling at 5,191, The Mail on Sunday can
reveal that Odey's fund is now almost 20 per cent up for the year.
It's a turnaround that has netted him an estimated
£115million in three weeks – just as most private investors nurse losses of
around 30 per cent for the year.
Speaking to the MoS from an almost empty train carriage,
Odey – who lives in a Georgian Grade II listed country mansion in
Gloucestershire but works from a Mayfair office in London – says he had no
knowledge of what would cause the great crash. He was just sure a giant
correction was inevitable after such a long bull run.
'The market hasn't been this interesting since 2008,' he
says. 'Going into March, I was down 12 per cent for the year but my fund is now
between 18 per cent and 20 per cent up for the year.'
Intriguingly, he credits the size of this year's shares fall
not to the scale of the economic disruption caused by the coronavirus epidemic,
but to the rise of automated trading. Yes, he says, the virus crisis triggered
the crash. But the reason shares have gone so far through the floor is that
City traders now use robots that are programmed to sell, sell, sell and protect
profits when the market starts to tank.
'The big difference between now and the last big crash in
the 2008 financial crisis is the trading machines,' he says. 'The machines just
never stop selling when the market falls. That's why you are seeing such high
levels of volatility and big index moves down.'
Odey knows a thing or two about big crashes. He made most of
his fortune betting against banks such as Bradford and Bingley in 2008 – and
notably rewarded himself by building a £150,000 neo-Palladian style chicken
coop at his mansion.
It thrust him and his wife, Nichola Pease, the chairman of
Jupiter Fund Management and member of the family that set up Barclays, into the
headlines at a time when the rest of the country was gripped by austerity. Like
other hedge fund bosses, Odey often gets a bad rap for his mastery of a tactic
called short-selling.
This is where a speculator bets against a firm by borrowing
some of its shares from another investor and selling them on the stock market
at the current price.
The gamble is based on the speculator buying back those
shares later down the line for a lower price – perhaps after a prolonged fall –
then returning them to the original owner at the original price, minus a small
loan fee, and pocketing the difference. Short-selling is hated by the companies
targeted in this way as critics argue it artificially depresses share prices in
a sort of self-fulfilling prophesy.
Amid the market rout earlier this month, for example,
short-selling was banned on some shares in the Italian and Spanish stock
markets.
But ordinarily it is regarded by regulators and most of the
City as an entirely legitimate stock market trading tactic. In fact, hedge fund
tycoons such as Odey argue that short-selling is healthy because it keeps
failing companies in check and on their toes.
If nothing else, it requires nerves of steel. At the
beginning of the year, most stock market gurus were predicting that the FTSE
100 would soar. Some even thought it would smash through the 8,000 barrier to
hit new records. Had the bulls been proved right, Odey would have been left
deep in the red and facing a battle to make up heavy losses for his clients.
In the event, he stuck to his guns and his bet against some
of Britain's best-known companies – including tonic-maker Fevertree, Metro Bank
and shopping centre giant Intu – came good more quickly than anyone could have
imagined. So what does Odey make of his extraordinary financial success while
coronavirus lockdown grips Britain, jobs are lost and hundreds die?
'This feels like war,' Odey says solemnly. 'The situation is
pretty awful. It seems the original advice given to the Government (about the
scale of the crisis) wasn't good enough.' And it has led him to a conclusion
that will terrify many investors: 'I have a feeling that one of the big hedge
funds is about to go bust and I worry we will find ourselves with inflation
once the Chancellor's £330billion emergency loan scheme kicks in.'
So could the FTSE 100 fall further still, and end up at the
3,000 level by the end of the year, for instance? Odey pauses, and then
delivers a surprise: 'I think it has to rally because a recession has now been
priced in,' he says, his voice rising in optimism. 'I'm buying some shares now.
It's a good time to be stock picking.'
Odey has recently increased his stake in telecoms giant Vodafone,
according to Bloomberg data. And reports claim in recent weeks his firm bought
shares in Euronav, a crude oil shipping company based in Holland, Swiss bank
UBS and Charter Communications, the American cable company in which John
Malone's Liberty Broadband Group has a large stake.
He isn't the only Brexiteer hedge fund boss striking a more
upbeat tone. Savvas Savouri – chief economist at Toscafund, a hedge fund set up
by Martin 'the rottweiler' Hughes (who got the moniker for a ruthless
commitment to his work), and an arch critic of Odey – says: 'By the end of the
year, I believe equity markets will have rallied off the bottom. And those who
are paralysed in panic today will be saying they really wish they had bought
back in.'
Still, Odey admits the current state of affairs is dire and,
taking off his hedge fund hat for a moment, it is clear he feels compassion for
those whose lives are being turned upside down. Fellow business tycoons and
sports stars are starting to put their hands in their pockets and offer free
services to NHS workers battling to help the sick.
Roman Abramovich, for example, has agreed with the NHS that
doctors and nurses can stay at the Millennium Hotel at Chelsea Football Club's
ground in West London over the next two months free of charge. Would Odey – who
last year was estimated to be worth £775 million – be willing to use his wealth
and follow in the Russian oligarch's example?
'I haven't been approached yet but I would be happy to
help,' says the ardent Boris Johnson supporter who made huge donations to the
Leave campaign. 'If I was asked, I would be happy to help out in some way.'
Comments
Post a Comment