Friday, September 30, 2011

Hugh Hendry - Eclectica Fund Aug 2011 +1.5% MoM

So Mr. Hendry's latest report on his Eclectica Fund is out and not a lot of fundamentals, the part that I am mostly interested in,  were discussed. Just performance attribution, risk allocation, etc.

Hendry is now up 9.9% YTD.

Unfortunately I didn't find anything about his Credit fund which the FT said is over 30%+ this year betting against China.

Click for readable size.

*Disclaimer: charts and data are presented as I receive/see them. Sources are usually not checked for validation and my own calculations are of 'back of the envelope'-type. I am aware that some math that I do myself might be wrong and/or misleading to some extent. In financial markets the rate of change of economic data is often more important than the actual level and the perception of 'what is priced in' is more important than 'what is actually going to happen'. This is actually the way people pick entry and exit points. So... yes, sometimes you might say 'This guy is an idiot, this is way wrong!' with a high conviction, being right. Not to worry. Markets are made of expectations and the clash of conviction between its participants. Portfolio managers know that being an idiot is sometimes profitable and being smart is often a bad choice. It is all reality, sometimes good, sometimes bad. By the way: corrections to my analysis and intelligent debate is welcome. theintriguedtrader AT gmail do com


  1. Can he actually make any money without using Credit Default Swaps?

    I know many legends who say it is time to ban these unfair instruments and do not use them. Guys like Michael Steinhardt, George Soros, Leon Cooperman, Jim Rogers, Julian Robertson and many others. After all Mr Hendry's goal, as he once said himself, was to be better than Soros, and be remembered as a great money manager.

    It seems to me that he will not able to accomplish anything as remotely close to that, until he learns how to go long and go short in a real markets like equities, bonds, commodities and currencies. In the meantime, he just remains a second class money manager using an instrument that requires no skills and will most likely be banned eventually.

    If they do not ban it, I guess he can make a career out of it. If they do, if I was him, I would start looking for another job. The money goes to all who are smart and lucky enough to acquire it by any means necessary, but the glory only goes to the real managers!

    All in all, no recognition will be given to a CDS trader; and that is what he is so desperately after.

  2. No offense, but why waste time judging Mr. Hendry's ability to manage money or compare him to other managers?

    You either want him to manage your money or you don't.

    And the job of a money manager is simple: profit.
    So far it seems Eclectica is beating most of his peers.

    I'd rather see this space used for discussions about global macro fundamentals

  3. Dear TailChaser, I've followed your blog for a while and am pretty impressed. I have failed to find out your funds proper webpage though - do you still accept new clients?

  4. This blog was created simply for me to put my ideas into paper, formally and publicly, so that I could come back and revisit what the market environment was like when posts were written and what my views were compared to market-reality when the posts were written.

    The trades were posted as a way to keep a track record of how certain securities and/or asset classes behaved as global developments unfolded.

    If you're interested in doing business, be it through consulting, or simply exchanging ideas and confronting viewpoints I am more than pleased to cooperate.

    One of the objectives of the blog was to attract talented professionals to the discussion in order to improve risk-adjusted returns.

    You can find me on if you want.


  5. Eclectica always outperforms peers during downturns and does very poorly during upturns. Hugh is a great thinker and always a hedge - something a hedge fund is actually meant to be. I agree that this space should be used for macro market themes, it is just my interest to see weather you think he can make any money without CDS - my original question?

    Back to the topic of macro themes - the overall risk market become quite oversold from near term basis and a slick old school bear trap caught a lot of short interest into a trap on the S&P 500 around 1,100 from Tuesday onwards.

    Sentiment remains extremely negative on equities and foreign currencies, so I would expect a strong rally for awhile. I also think Treasury Bonds are a short here, mainly the 30 Year. However I do admit all of this might just last a few weeks to a month or so, because we are in a bear market.

  6. I first started to enjoy reading from Hendry exactly because I think he goes a good way in executing his ideas (finding derivatives/securities that give him more leverage, better reward for unit of risk). Be it through CDSs or not. He could, perhaps, short bonds outright. It would work the same way.

    Yes: sentiment is very, very negative and the economic downturn hasn't yet unfolded fully. That is why I mentioned before that it is getting more expensive to bet on more risk-off times. Equities are cheaper, implied vols on options are higher, credit spreads are wider.

    That is why I put on the short EURBRL trade and why I thought about (and regretted not doing it) shorting Mar12 Italian CDS @ 400bp (it was actually bid 412bp when I requested a price from a dealer).

    So... interesting times ahead. Still the same fight against policy makers who want to avoid bad debt being written off.

    Have you thought about some interesting trade ideas?

  7. I mainly invest in the directional trades, between currencies, commodities, equities and bonds.

    So I'm still on the sidelines while waiting to go long Agriculture. I am a huge bull on Chinese demand of Agri-commodities. I do not believe a property bust will stop wage growth over long period of time and therefore the demand for grains and softs.

    From the more short to medium term perspective, I will also be adding more US Dollar positions against Asian currencies or even commodity currencies as we go through this pullback in Dollar price, while risk rallies for awhile. I believe inflation fight is over and the US Dollar has been discounting rate cuts across emerging markets since at least August.

    I would like also to buy some puts on Wynn Resorts because Chinese tycoons in real estate are about to go bust, and their "fun activities" in Macau are going to slow down for awhile at least. I'm also short Hermes on the CAC for the same reason.

    I also think Apple or Amazon are shorts as we fizzle through this risk bear rally, because everyone there is a bull and during recessions or downturns almost all stocks go down - including the bullish pillars of strength.

    Finally, once the US Dollar finishes its rally for several more months or quarters (whichever one) and this is all done, they as in the whole world, will print so much money and I plan to short the living s&%t out of the Dollar, by buying Singapore Dollar and much much more precious metals, especially Silver.

    All in all that is my view for awhile. While majority focus on EU I'm watching China. Defensive strategy until it all blows up and the dust clears, than short US Dollar until it goes to its intrinsic value of 0 and Gold and Silver finish its secular bull market in a blow off bubble ala 1980...

    That is the plan! =)

  8. Found your site today and i will be back...

    Hugh Hendry - interesting guy but not impressed by the performance less than 10% cagr?

    A bit confused by the perf.chart. In the chart there seem to be a huge draw down (40-50%?) after the 2008 top.
    But looking at the monthly figures there isn't?

    Hypotheticaly and speculatively:
    If that drop really is correct then Hugh's risk management is questionable. That drop can not be within his calucalted risk boundaries.
    If it is he is risking more than what is healthy for long term fund survival.


  9. Let's say I still like the guy.

    He is pretty blunt and objective and in fact seems to get the big macro picture correctly in my humble opinion. At least that is the impression I get from his public appearances.

    His performance? Well, that is his business and I hope he does well.

    And +10% CAGR seems like a good number in my opinion. No?

    Most brazilian multi-strategy hedge funds, if discounted for the average 1-year risk-free rate, have ridiculous performances and they still charge 2/20 from their clients.

    Making money isn't easy, at least not in my view.

    And thanks for the comment. Always good to read opinions of readers.

  10. You are right 10% is good when comparing with
    hedge funds.

    As seen in this study:

    I was (in my mind) relating it to the drawdown in the chart.

    Any clue on what's going there (chart vs table)?

    Maybe you have seen this interview with Hugh:


  11. No idea about the chart x table issue.
    In Brazil NAVs are published on a daily basis and that is according to regulatory measures.

    Despite not being a very experienced industry (investor wise and manager wise) the brazilian regulators have done a superb job.

    And yes, have seen this video and many more.