- Crispin Odey's hedge fund has returned 193% year-to-date amid the UK market turmoil, according to a Bloomberg report.
- The hedge fund scored big profits from a short bet against UK bonds and the British pound.
- Odey's gains are a record for the fund, which bested the firm's prior record 60% return in 1993.
Hedge fund manager Crispin Odey is having a record year thanks to his fund's timely short bets against UK bonds and the British pound, according to a Bloomberg report.
The hedge fund has returned 193% year-to-date, with gains of about 25% in September pushing it well past its previous record gain of 60% in 1993, a person with knowledge of the matter told Bloomberg.
Heading into September, Odey's short exposure to UK bond trades was worth 111% of the fund's net asset value. Most of the firm's short bets were concentrated in UK government debt that matured in 2050 and 2061, according to Bloomberg.
That big bet paid off handsomely following last month's release of UK Prime Minister Liz Truss' fiscal plan that included unfunded tax cuts for the rich.
Investors grew concerned about the tax cuts and whether or not they were fiscally and economically sustainable, especially during a period of elevated inflation. The plan sparked the British pound to fall to a record low relative to the dollar, and led to selling in UK government bonds so intense that the Bank of England had to intervene to prevent a financial crisis.
The Bank of England said it would purchase up to $70 billion worth of long-dated UK bonds and postpone its planned reduction of its balance sheet.
Truss and her finance minister Kwasi Kwarteng ultimately walked back their tax cut plan due to the market's reaction, leading to a mild recovery in both the pound and UK bonds.
It is unclear if Odey has closed his short bets against the pound and UK bonds. Last month he told the Financial Times the pound would likely reach parity with the US dollar. "I don't think you can start getting bullish on sterling," Odey said.
After the pound fell to a low of $1.03 relative to the US dollar, it has since recovered nearly all of its losses related to the Truss tax cut debacle, rising to $1.14 relative to the US dollar.
The flagship Odey European fund strategy managed by Odey Asset Management had $965 million in assets at the end of August.