About 30% of hedge funds will go to the wall in the next few years, says Credit Suisse, as banks withdraw credit lines and investors withdraw their money. But the chances are that Hugh Hendry’s Eclectica Fund won’t be one of them. In the year to date, the fund is up 20% against a 9.9% drop for the average hedge fund, according to Credit Suisse/Tremont.
A long-term fan of commodities, Hendry sold out of precious metals earlier this year, believing that a deflationary shock was around the corner. The call has been profitable so far – the fund’s value has soared as he invested heavily in bonds, borrowing money to do so. His favourite is a 30-year German government bond now yielding 4.2% in euros.
But Hendry doesn’t think we’ve seen the last of inflation, which he expects will return as governments start printing money to try to spur their economies out of recession. Once that happens (Hendry suspects around 2010), he plans to buy gold again, which he sees rising to as much as $2,000 an ounce.
Hendry is far less upbeat on stocks, believing they aren’t going anywhere for the next 15 years. He also avoids meeting company’s management teams, “because they shine with enthusiasm and it’s infectious”. The minimum investment in the fund is €100,000 and it charges the usual 2% annual fee, plus the 20% performance fee that the industry is notorious for – but as long as Hendry continues to deliver, this is a fund that wealthier investors may want to consider.
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