Forget about Brexit – it won’t happen, says top bond fund manager Jeffrey Gundlach. The founder of DoubleLine Capital, which has more than $84bn under management, says that investors who are hedging against a ‘Leave’ vote are “wasting their money”, reports the Financial Times. “People like to complain,” he says. “But then when it comes down to actually pulling the lever… The devil you know is better than the devil you don’t know. Look at what happened with Scotland.”
It has also become increasingly expensive to hedge against Brexit – the cost of buying protection against a fall in the value of sterling is close to the high seen in 2010, after the UK election that led to the coalition government. That’s overdoing the panic, says Gundlach. “The odds are less than what people have embedded into their protection so it’s likely to lose money. And nobody knows what would happen under a Brexit anyway; so often things go the opposite way from what people expect. Maybe your hedge is actually in the anti-hedge.”
Gundlach has made some astute political calls in the past. When Donald Trump announced his candidacy for president – to disbelief from most – Gundlach told his traders that the tycoon’s chances of winning were higher than anyone realised: “the greatest long in the entire world is Trump’s odds to win the presidency”. What should investors do if Trump wins? Buy defence stocks.