In March, billionaire hedge fund manager Crispin Odey said we all have “grandstand seats for an imminent market shock.” As it turns out, a “shock” was indeed “imminent” for Odey but unfortunately, he ended up on the field of play rather than observing from the bleachers. As FT reports [5], a leveraged bet against the Australian dollar that had been working well cost the London-based manager dearly in April. Here’s more:
Odey Asset Management founder Crispin Odey’s flagship hedge fund slumped 19.3 per cent last month, after it was caught out when the Australian dollar strengthened against the US dollar.
The large one-month move, from one of London’s best-known hedge fund managers, wiped out Odey European’s small gain in the first three months of the year and took its 2015 performance to -18.2 per cent, according to investor documents.
The €2.33bn fund has built up a short position in the Australian dollar against a long position in the US dollar, which drove monthly gains of 4.6 per cent in March. However, since the end of March the Australian dollar has gained against the US dollar.
Odey’s currency position is leveraged, which magnified the losses.
This week, the Reserve Bank of Australia reduced its cash rate by 25 basis points to 2 per cent. But the Australian dollar rose even higher against the US dollar, following weaker economic data from the US.
Ironically, Odey can take comfort in the fact that at least one of the central bankers who he believes won't be able to "pull a rabbit out of a hat [6]" or otherwise extricate the world from an inevitable downturn, thinks his position on AUDUSD is generally the right way to bet:
RBA governor Glenn Stevens predicted that the Australian dollar was likely to weaken in the medium term, as part of a wider trend.
“The Australian dollar has declined noticeably against a rising US dollar over the past year, although less so against a basket of currencies,” he said. “Further depreciation seems both likely and necessary, particularly given the significant declines in key commodity prices.”

