market folly

Today we present you with Hugh Hendry's latest investor letter out of his Eclectica Fund and his Absolute Macro Fund. For those unfamiliar with Hendry, he has become sort of a resident deflationist and has been an advocate of long treasuries positions. Prior to founding Eclectica in 2002, he was a partner at Odey Asset Management. He definitely seems to be a contrarian here as the Eclectica Fund finished 2008 up 31.2%, finished 2009 down 8.0% and through January 2010 was up 3.7%. Their gains this year have stemmed from their fixed income positions.

In terms of recent portfolio activity out of the Eclectica Fund, Hendry notes that they sold over half of their 2 year forward curve steepeners in the UK. As of the end of January, currency positions represented 31% of their NAV, while government bonds (greater than 10 year) represented 18.3%. You can directly download the .pdf of Eclectica Fund's recent performance attribution here.

Hendry's other fund (Absolute Macro) aims to "achieve positive returns through strategically allocating capital across multiple asset classes on a global basis." We got a glimpse at the Absolute Macro Fund's Top Ten Holdings:

1. Currency: Long EUR / Short LVL: 19.8%

2. Australian 10 year government bonds: 7.4%

3. German 30 year government bonds: 7.1%

4. MetroPCS Wireless 9.25% 2014: 2.9%

5. Long USD / short GBP: 2.8%

6. Imperial Tobacco: 2.6%

7. British American Tobacco: 2.6%

8. Altria Group: 2.5%

9. Lorillard: 2.5%

10. Philip Morris International: 2.4%


Obviously, you see quite a mix of macro bets and equity plays. What's interesting is that ALL of Hendry's top 10 equity holdings are tobacco or cigarette companies. Overall though, the vast majority of their Absolute Macro holdings are appropriately in macro bets with currencies and fixed income. They also have a 1.5% short equity allocation via Eurostoxx put options.


Attached below is the Absolute Macro fund's commentary:



You can also download a .pdf directly here.

So, a brief but interesting look into what Hendry has been up to as of late in his various investment vehicles. Obviously though, you'll want to focus on the moves out of the Eclectica Fund as that's where he devotes most of his time and where most of his net worth is tied up. If anyone has access to Eclectica Fund's most recent commentary, please get in contact with us as we're trying to track it down. For more insight from Hugh Hendry, check out his take on how he would invest $100 million at a recent investment panel. Previously, we've also posted up some past Eclectica Fund commentary if you want to check that out as well.