‘It wasn’t meant to be like this’: Hugh Hendry’s farewell letter than three years later he quit Odey to set up his hedge fund boutique Eclectica. Below we repost his full final letter in its entirety, and wish Hendry good luck in his next endeavour. * * *. CF Eclectica Absolute Macro Fund. Hugh Hendry is back with a bang after a two year hiatus with what so many have been clamoring for, for so long – another must read letter from.

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I would stay long. We think there may be life left in the old dear yet.

Hugh Hendry Q3 Letter: Dramatic Fulcrum Point; Only Precedent Is s

I have always figured that the first is the real key. They wanted to tighten credit conditions gradually. Since the Brexit referendum we have been developing our thoughts about what the Leave vote might mean, not just for the UK, but for the European project as a whole. He has since decided to move to Paris, and says his challenge eclecticw to find out what hendryy him happy.

I think they eclectlca undermining the ability of the Federal Reserve to respond proactively; the Fed is simply not going to hike rates under such conditions having learnt the hard way back in and Markets initially thought the US could cope with this higher level of rates, but with a slowing economy, an unfortunately-timed oil price crash, and persistent ghosts in the machine like the substantial Yuan devaluation fear which never materialised they were proven wrong.

And this explains our inactivity in G7 government bonds. That success was simply a matter of contentious macro posturing. Eclectica Asset Management — Hufh oil price and the end of the commodity super cycle We wrote at length last month about our view that falling oil prices are a benefit rather than leetter threat for the majority of the world economy.

We are very robust. Can I tell you about the real world? Typically these creditor nations already have low interest rates and seem likely to need further currency weakness if they are to defend their henddry.

Popular job sectors Popular job sectors Loading I do not think it is logical to try and outsmart the smartest people. The outspoken Glaswegian has shuttered the 15 year-old fund after it slumped 9.


Hendry studied Accounting and Economics at Strathclyde. A policy error now could jeopardise the whole European project.

In the past, correlations have, just like in the stock market, typically been negative between the price SPX or Treasury and the implied volatility VIX or swaption vol.

It culminate with July and August, when Hendry posted some of his worst monthly returns on record which ultimately sealed his fate, and as he writes in a letter sent to investors today, Hendry decided to shut down his Eclectica hedge funds after 15 years, following a 9.

That is to say, they honoured the pact they had with clients. However if an inflationary path like is gestating then I fear there is very little chance that anything timely will be done about it. Recent events come on the back of a period of profound Mexican peso weakness; indeed since the end of November the peso has been one of the worst performing currencies in the world. We believe it is possible to demonstrate that such headline grabbing Armageddon scenarios can be addressed and hedged at a very modest cost, if not profit, whilst retaining upside exposure should, as we contend, such fears prove overstated.

However, for this letter we would like to return to the four main concerns in global macro presently and review how the other half of our risk budget is attuned to such threats.

As we see it, the opportunities to benefit from such a position are twofold. To contact the author of this story with feedback or news, email Tom Teodorczuk. Fixed income volatility lettee surge. There was an error with your request. That is the kind of guy I want to be when I grow up.

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So it is entirely rational especially if you have never met a hedge fund manager to assume the industry attracts the brightest, smartest minds. According to this article in the Independent, Hendry was the first in his family and one of the only people at his school to go to university. Sadly I will be unable to participate with such trades during the next upheaval in global markets with the Fund but I hope that this commentary has at least roused you into contemplating scenarios that are presently deemed less plausible.

First of all we have the still too close to call US presidential election where a Trump victory would be hailed as a triumph for the same arguments that led to Brexit.


The clear message is that 1. This scenario would diminish greatly if bond curves steepened a lot now and gave the Fed the credibility to hike. If we are right then by some point international fixed income managers will have hedged their exposure making the system less brittle and with a credible austerity-driven finance ministry and the tantalising prospect that the oil price is stabilizing, Mexican fixed income would become yet more appealing.

The Fund’s ten-year NAV progression demonstrates this survivorship bias; when bad things have happened, we have made money.

Rate hikes will continue to be sparse, we only have one quarter point hike predicted between now and the end ofwhich if fulfilled will be highly unlikely to spark a severe recession. We respect your privacy no spam ever. Partner, Odey Asset Management My contention is simply that fixed income volatility has over shot to the downside, that such moments are fleeting and that you are not necessarily dependant on a correction in treasury prices.

Hugh Hendry Q3 Letter: Dramatic Fulcrum Point; Only Precedent Is 1930s

He compares his investment philosophy to the famous quote from iconic footballer Eric Cantona: Look at the graph below, the unemployment rate red is at lows, job openings blue have increased beyond the hiring rate teal and are now approaching the unemployment rate for the first time since the Job Openings and Labor Turnover Survey data began.

Subscribe to ValueWalk Newsletter. In a letter to investors he said he’ll sit out of trading until the next downturn, but said he’s optimistic about the global economy. As G7 rates tumbled to zero the steep yield curve in Mexico proved one of the few credible places left to receive rates and allied to encouraging set of reforms of the political economy it seems that some investors neglected to hedge their currency exposure which left them exposed when the petrol-peso was dragged down by the tumbling oil price.

Looking at the one year implied volatility on 10 year swaps, the cost of entry seems reasonable even compared to the narrow trading range we have seen this year.