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Haynes: The Odey fund we’re using to make the most of volatile markets

23 October 2014

Whitechurch’s Gavin Haynes tells FE Trustnet why he has turned to FE Alpha Manager Crispin Odey’s Odey Swan fund for his clients.

By Alex Paget,

Senior Reporter, FE Trustnet

Investors who want a fund that is lowly correlated to other asset classes and can make the most of market volatility should turn to FE Alpha Manager Crispin Odey’s Odey Swan fund, according to Gavin Haynes, who has recently added the fund to his aggressive portfolios.

Haynes, who is managing director at Whitechurch Securities, has been a long-term backer of Odey and started using his Swan fund, which sits in the FCA-recognised offshore universe, as it is effectively a compilation of the manager’s best macro ideas.

Due to Odey’s views and macro calls in the past, Haynes says the £322m Odey Swan fund would be a good addition for an investor who wants a portfolio which can “provide a boost when other asset classes are having a tough time”.

“We’ve been with Crispin Odey for a long time through a variety of his offerings,” Haynes (pictured) said.

ALT_TAG “We took a small position in this fund shortly after its launch last year and it provides us with insurance against some of our other views. However, we only use it in our aggressive portfolios because effectively it is a regulated version of a global macro hedge fund.”

“It is a collection of his best ideas and his key macro themes and he will take both long and short positions across global equity, bond and currency markets.”

Odey Swan was launched in March 2013 and though Haynes is fan of the manager and his process, he has been disappointed with its returns so far.

According to FE Analytics, Odey’s fund has lost 3.85 per cent since launch and has been extremely volatile.

Odey Swan doesn’t have a benchmark, but as a point of comparison the FTSE All Share has returned 5.24 per cent while the iBoxx Sterling Gilts All Maturities index is up 6.24 per cent over the period.

While it has underperformed, data from FE Analytics shows that the fund has had a correlation of just 0.3 to global equity markets and -0.07 to bond markets.

Performance of fund vs indices since Mar 2013

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Source: FE Analytics

Haynes says he is willing to stick with the fund through bad patches of performance due to Odey’s proven ability to get macro calls right. One of the best examples was in the build-up and during the financial crisis.

The manager felt that there were weaknesses within the financial system and used his ability to short to bet against the banks and other economically sensitive areas of the market.

This helped his flagship hedge fund to deliver a 10 per cent return in 2008, while most of his peers were hit with significant losses.


FE data on Odey spans back to August 2001, over which time he has returned 289.19 per cent to his investors, beating his peer group composite by more than 200 percentage points in the process.

Performance of manager vs peer group composite since Aug 2001

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Source: FE Analytics

The major reason why his Odey Swan fund has underperformed since launch, according to Haynes, is because the manager has long been negative in his outlook for emerging markets, most specifically China.

This view came back to bite him in March this year, when the MSCI Emerging Market index rallied from very low valuations.

Between March and June this year, the index returned 7.82 per cent while Odey Swan lost 13 per cent.

However, in his most recent note to investors, Odey explained why he will continue to be negative on the developing world within his portfolio.

ALT_TAG “Having just seen a quick sell-off which has allowed no one to escape, we may be due a bounce. Currencies and stock markets are quite beaten up. However, the forces that now beat down upon the EM countries in particular are growing in force, not dissipating,” Odey (pictured) said.

“Will the world really be able to withstand currency devaluations? At some point, even the USA will be affected. Until then just stay long the US dollar.”

The fund has performed well in the most recent sell-off, however.

Concerns over the end of quantitative easing in the US, high market valuations, fears over deflation and recession in the eurozone and increased geo-political tensions have all contributed to the recent fall in equity markets.

In September, the FTSE All Share lost 3.15 per cent while Odey Swan delivered a 10.55 per cent return.

Odey has since handed back some of those returns in October, however, as equities have recovered slightly.

Nevertheless, since the start of the correction, the fund has made a positive return while the FTSE All Share is down 6.5 per cent.


Performance of fund vs index since Sep 2014

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Source: FE Analytics

Haynes also thinks the currently volatile environment is well suited to Odey’s approach.

“His macro calls have been very good in the past and I listened to a web-call with him recently and he said he was seeing some excellent opportunities on the short side,” Haynes said.

“When markets are volatile, that is when he can make money and he said he is seeing the most amount of opportunities since 2007, which might be concerning for investors. However, this is an interesting fund which we hope can add value during difficult times.”

Odey is currently net short equities and government bonds in his Swan fund. In terms of currencies, he is long the US dollar but short sterling and the South African rand.

He is also short the Aussie dollar, which is based on his negative view on the Chinese economy.

Odey Swan is available on most fund platforms. It has an annual management charge of 1 per cent, but has a performance fee of 20 per cent.

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Crispin Odey

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.