Odey Swan is a UCITs version of the star manager’s well-established hedge fund Odey European, and will have the same holdings as the latter. It was only launched in March this year. Odey European has made investors a lot of money over the past decade from the manager's contrarian, high-conviction style, and Troue says that should appeal to investors with a long timeframe and a high appetite for risk.
"We are quite positive overall," Troue said. "It’s just his hedge fund within a UCITS retail-friendly wrapper, which we look at as quite an attractive proposition."
"What we would say, though, is that we think Odey (pictured) is a very good manager but the kind of guy you want to leave your money with for 10 years or more."
"It’s certainly going to be a volatile investment: he has a lot of flexibility to back positions with a very high conviction."
"He’s not just investing in stable stocks for the long-term, he is investing in a whole range of different companies and it is probably going to be a wild ride."
Data from FE Analytics demonstrates this volatility: over the last five years Odey European has made 67.83 per cent while the global mixed asset hedge fund sector has done poorly, losing 12.59 per cent.
Performance of fund vs sector over 5yrs
Source: FE Analytics
However, over that time the annualised volatility on the fund is 21.03 per cent, while that of the average fund in the sector is just 7.5 per cent.
For comparison purposes, the FTSE All Share has made 32.73 per cent over this time with an annualised volatility of 17.06 per cent.
The fund can take both long and short positions, which means the manager bets on a stock performing poorly in the future and will make money if it loses value.
This has helped it to achieve a relatively low correlation to the major stock market indices that investors frequently concentrate on, meaning the fund offers diversification benefits.
Correlation of fund to indices over 5yrs
| Name | FTSE All Share | MSCI AC EUROPE | MSCI AC WORLD INDEX |
|---|---|---|---|
| Odey European | 0.66 | 0.69 | 0.67 |
Source: FE Analytics
Odey tends to take big positions in stocks he likes, even when they are unloved by the market, and sticks with them even when they fall, which is one contributor to the volatility of the fund.
"If you look at some of the stocks he has held in the past, he has taken big positions in Sky Deutshcland and in some of his other funds he’s not afraid to take positions up to the maximum he is allowed," Troue continued.
Sky Deutshland is a controversial choice of stock. Robert Smith, of the Baring German Growth fund, says that the company has been struggling to become profitable in a country that does not have the culture of pay TV.
Smith has only opened up a position in the last few months, having changed his mind on the company’s prospects, but Odey has long said he believes the company will buck the market consensus.
Troue said: "A lot of people may dismiss Sky Deutschland and think 'that’s the way the Germans are and it will never take off', but he is taking a different view."
"They [Sky] already have a foothold in the country and know how to do it and the population of Germany is huge so there is a massive customer base there waiting for them."
"He’s also got the power to leverage the fund up as well," Troue added.
UCITs rules limit the amount of leverage a fund can take on, as well as limiting position size and the amount that can be held in derivatives.
Orlando Montagu, head of business development at Odey Asset Management, says that the new fund will replicate the hedge fund except where it would breach the regulations to do so.
He stresses that at the moment there is no issue with the limitations imposed by UCITs.
One issue for investors is the lack of information on the fund. While most fund houses make monthly factsheets available to potential investors, Odey does not.
The reason, Montagu explains, is that Odey’s fame is such that every movement would be pored over by the press for significance.
However, this does mean that until an investor actually invests, they will find it hard to obtain information about the holdings of the fund.
Montagu stresses that the fund house strives to be extremely open with information to clients, and this contributes to its desire to keep such extensive information from non-investors.
Troue says that the performance fee is a concern.
"The one negative is the fee structure," he said. "It’s a hedge fund with a hedge fund fee-structure which includes a performance fee of 20 per cent on all gains, with no hurdle."
"I just think that while arguably Crispin Odey is the kind of manager that will ultimately earn his performance fee, that's something that we are not comfortable about in general."
Bestinvest’s Jason Hollands says the fund may be more appropriate for sophisticated investors, including discretionary managers, rather than retail investors.
He says that although the fund concentrates on equities, its flexible mandate allows it to invest across currencies and bonds as well.
The fund is likely to be around 25 to 30 per cent short, Hollands says.
"It is worth pointing out that Crispin Odey is bullish on equities, so in this respect the fund could initially have some similarity with the Odey Opus fund, which is a global equity long-fund available to the wider market," he added.
Odey Opus is a £351m UK-domiciled fund with a strong track record over the longer term, but it has lagged in recent years.
Data from FE Analytics shows that the fund has made 199.12 per cent over the past decade while the MSCI World benchmark has made 123.52 per cent.
Over five years it has made only 39.39 per cent, much less than the Odey European fund.
Odey Opus is available through platforms with a minimum initial investment of £500 and has ongoing charges of 1.58 per cent, according to data from FE Analytics.
Hargreaves Lansdown expects to offer the Odey Swan fund once paperwork has been completed.
The fund has an AMC of 1.5 per cent and the previously described performance fee.
The minimum initial investment will be either £500 or £1,000.