IN THE tight-lipped world of hedge funds, no one produces quite such a blast of fresh air as Hugh Hendry of Eclectica Asset Management. Opinionated, combative and fizzing with ideas, he has been described as a fruitcake by his rivals. Certainly he does nothing to tone down the eccentric image.
“I’m a Joan of Arc-type manager; I hear voices in my head,” he says when I ask how he picks his investments. In the course of a two-hour interview he twice more refers to voices in his head. One moment he appears egocentric: “I want to be known as the man who bankrupted Iceland,” he says of his current short positions in the krona, likening himself to his hero George Soros, whose bets helped to force the pound out of the exchange-rate mechanism on Black Wednesday. The next, he is self-deprecating, saying that he has no friends and doubts about his abilities. “No one wants to work with me. I’m a trouble-maker. I’m a bit of a circus freak.”
It is all a long way from the sober letter penned this week to the Financial Times, in which he went public to urge EMI to submit to a takeover offer from Warner Music, with Warner’s Edgar Bronfman put in charge of the combined business. Eclectica has a 2 per cent stake worth £50 million in EMI.
But the ability to surprise and shock is part of the stock-in-trade of Hendry, the son of a Glasgow lorry driver, who is a regular talking head on the CNBC business TV channel.
He began his career conventionally enough at the traditional Edinburgh fund managers Baillie Gifford (“cold-blooded, Calvinistic, they hate me”). He claims he was hired because he was working class. American clients were concerned about the lack of gene diversity among its mainly Oxbridge fund managers. “I was recruited as that little bit of grit, that bit of deviation.”
But he made his name at Odey Asset Management, one of London’s biggest and longest established hedge fund groups. He eventually fell out with its formidable chief, Crispin Odey, and left with colleague Simon Batten to found their own business last September.
The Odey years were formative for Mr Hendry, who has mixed feelings about his former boss. When he first arrived, he was overawed. “I felt like Salieri in that Mozart movie [Amadeus]. What do you do when you’re sitting in the presence of genius?” Nevertheless Mr Hendry turned in some spectacular investment performances and was soon running $1 billion of traditional long-only funds.
He outpaced almost every other long-only manager on the planet during the plunging markets of 2002, when he baled out of equities and kept his money in cash and bonds, attracting criticism at the time because his fund was labelled an equity fund. Today he is scathing of those “crappy people who think it’s OK to lose 20 per cent of their clients’ money so long as the peer group loses 30 per cent”.
His appetite for absolute returns and contempt for benchmarks was rewarded in 2002, when he was given his own hedge fund, Eclectica, to run. It was a baptism of fire. He lost 4 per cent in the first month, but thanks to massive punts on the rising gold price he ended up with a scorcher of a first-year performance.
However, the relationship with Mr Odey began to sour. According to Mr Hendry, he had been wooed from Credit Suisse expressly because of his oddball approach. “He [Mr Odey] told me, ‘Hugh, you’re one of us, you’re one of the pirates’.” But that opportunistic culture faded and Mr Odey became more interested in asset-gathering as his empire mushroomed, alleges Mr Batten, who co-founded the firm in 1991, and now says of Mr Odey: “He’s gone from having a nice, small pirate ship to having a navy, a flotilla.”
Whatever the precise reasons for the falling out, Messrs Hendry and Batten — both 37 and married with two children — mortgaged their houses and bought the contract to run the Eclectica fund. They rented a Bayswater office previously used by the film director Guy Ritchie and Eclectica Asset Management was born, owned 50-50 by the two men. Today it manages $650 million (£350 million), across three funds.
The investment style for the main Eclectica fund is broad — any asset category goes — and the approach unconventional. Mr Hendry never looks at brokers’ research, never meets company managements and is deeply sceptical of daily news flow. The style seems contradictory at times. He believes in not following the herd, yet he has an enormous respect for the market. The Eclectica website proclaims: “The market has infinite wisdom; it is divine.”
His punt on EMI — which accounts for 17 per cent of the Eclectica fund — has its origins in a eureka moment while listening to a CD of Pink Floyd’s Dark Side of the Moon. He realised he’d paid £12 for a product almost all of whose costs had been sunk 30 years earlier. As a business model it was, he says, “the holy grail of business; what Warren Buffett calls tenure over the future”.
Whether Eclectica finds the holy grail in the short term will depend not on the divine but on the earthly decisions of Mr Bronfman and his opposite number at EMI, Eric Nicoli.
An analyst who keeps his eye on the ball
ONE of the more surprising recruits at Eclectica is Espen Baardsen, whom Spurs fans know better as the former goalkeeper at White Hart Lane.
Baardsen played for Spurs in the late 1990s, but was dropped from the first team and transferred to Watford for £1.25 million and then to Everton.
Today, aged 28, he works as a financial analyst taking views on macroeconomic trends. During the past six months he has been “shorting” the New Zealand dollar, profiting from the 15 per cent slide in that currency. He is a bear of the Icelandic krona and is also active in commodities, taking views on anything from lean hogs to natural gas.
The life is less stressful than football and the hours are much more flexible, he says, though he admits it hasn’t the buzz of being on the pitch for a winning side.
US-born Baardsen, who was capped for Norway, was never the archetypal footballer. On his fan website he revealed his preferred reading was Milton Friedman and Immanuel Kant.
Pendulum will swing back, says tesco bear
ONE of the more surprising recruits at Eclectica is Espen Baardsen, whom Spurs fans know better as the former goalkeeper at White Hart Lane.
Baardsen played for Spurs in the late 1990s, but was dropped from the first team and transferred to Watford for £1.25 million and then to Everton.
Today, aged 28, he works as a financial analyst taking views on macroeconomic trends. During the past six months he has been “shorting” the New Zealand dollar, profiting from the 15 per cent slide in that currency. He is a bear of the Icelandic krona and is also active in commodities, taking views on anything from lean hogs to natural gas.
The life is less stressful than football and the hours are much more flexible, he says, though he admits it hasn’t the buzz of being on the pitch for a winning side.
US-born Baardsen, who was capped for Norway, was never the archetypal footballer. On his fan website he revealed his preferred reading was Milton Friedman and Immanuel Kant.
