Monday, April 12, 2010 0 comments ++[ CLICK TO COMMENT ]++

Behind the scenes look at Hugh Hendry




A stack of hardbacks sits on the windowsill in the office of hedge fund manager Hugh Hendry. They make up a reading list perhaps now common in London's embattled financial community.

The Volatility Machine: Emerging Economics and the Threat of Financial Collapse sits under a copy of Lords of Finance: The Bankers Who Broke the World, a timely examination of the Great Depression. On top of the pile, lies a dog-eared dictionary open at the page with words beginning "sco-". What was Hendry looking up? He bounds around his desk. "Oh, yes," he says, running his finger down the page, "it was for an article I wrote about hedge fund managers last week. I was looking up 'scourge', as in 'scourge on society'."

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Hendry is the boss at Eclectica Asset Management, which he launched five years ago. Like all hedge funds, it takes money from investors and uses it to make bets on their behalf. A good bet means a healthy return for investors – and, of course, a fat fee for the fund manager. Eclectica is, by his own admission, a hedge fund minnow. "The total size of the assets we have under management is about £450m," he says. "There are funds that manage $20bn [£13bn]." Leading a team of a dozen or so fund managers, analysts and traders, Hendry asks his clients (most of whom he says are individuals) to invest a minimum of 100,000 dollars, pounds or euros. He says that most funds demand at least $5m. Talking later about the real big hitters, Hendry says, "Some of these guys, I should be shining their shoes."
 
But it's clear that Hendry does okay. He responds to enquiries about his personal wealth (and many other questions about his private life) with a polite "fuck off", but his financier's uniform of well-cut blue shirt, navy tie, Gucci specs and a chunky Louis Vuitton watch shouts money. Not that all areas of his life conform to the stereotype. His stark, mahogany-free office is not in Mayfair or Knightsbridge but in the shadow of the Whiteleys shopping centre in Bayswater, a short hop in his G-Wiz electric car from his Notting Hill home. Sure, he has a house in the country ("a Cotswolds caricature"), but he reaches it, with his wife and three young children, in a second-hand Land Rover Discovery.

  I ran across an interesting article from The Independent profiling Hugh Hendry of Eclectica Asset Management. Hendry is probably doing poorly right now but it remains to be seen how good he really is. The main topic of the article is about the hedge fund industry and the attempt by European governments to tighten regulations. As I have said in opinion pieces before, I think the government is going after the wrong targets. The governments should really regulate the banks and, in particular, separate conventional banks from the shadow banking system. Hedge funds appear to be easy targets even though they had very little to do with the financial crisis.
 
However, the European governments, like the East Asian ones in the late 90's, are somewhat right in suggesting that hedge funds are attacking Greece and others perceived as being weak. The thing, though, is that the fundamental problems were due to past actions by governments, citizens, and banks and even if hedge funds were not attempting to profit off doom & gloom, it wouldn't change much. For instance, if the status quo was maintained and no hedge funds existed, Greece would still end up with a financial crisis in the future. In fact, the crisis might may be far worse because the Greek government would have run up the debt to even higher levels.
 
Hugh Hendry fans will find the article kind of fun to read; others may find it boring since there aren't any investment strategies or ideas in the article. If you want a very quick summary, you should check out this BBC video clip.
 
I completely disagree with Hendry's characterization of hedge fund operators as doing social work—it's an insult to real social workers who do hard work with little pay. I think Hendry is a bit arrogant for my liking but I do like his contrarian thinking and even his quirky lifestyle. Hendry doesn't run a big fund like other hedge fund managers who make the news and hence isn't very rich; but he is still rich and who else on this planet would be driving the tiny G-Wiz electric car to work? LOL (check out the video to see what I mean :) )

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