Hedge fund tycoon Crispin Odey cashed in on 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.

Fortune teller: Odey forecast the stock market plunge

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.’

Machines don’t stop selling when the market falls

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.

Odey has recently increased his stake in telecoms giant Vodafone

Odey has recently increased his stake in telecoms giant Vodafone 

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.

If I’m asked to help out in this crisis, I’d be happy to

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.’

Crispin Odey, 61: Chicken lover 

Family: Wife Nichola Pease, below, chairman of Jupiter Fund Management and member of the family that set up Barclays. They have two sons and a daughter. Previously married to Prudence Murdoch, daughter of media tycoon Rupert Murdoch.

Odey is married to Nichola Pease, chairman of Jupiter Fund Management

Odey is married to Nichola Pease, chairman of Jupiter Fund Management

Home: A Georgian Grade II listed country house at Bicknor in Gloucestershire, with £150,000 chicken coop.

Education: Harrow and Oxford university.

Estimated net worth: £775million.

Political activity: Has donated to Ukip, Vote Leave and the Conservatives.

 

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