Business World

Friday 18 August 2017

'Mindless' passive investing killing markets, says Odey

Hedge funds suffered net withdrawals of $80bn (€76.5bn) through December 16 this year, the first outflows from the industry since 2009, according to preliminary estimates from data provider eVestment. Photo: Reuters
Hedge funds suffered net withdrawals of $80bn (€76.5bn) through December 16 this year, the first outflows from the industry since 2009, according to preliminary estimates from data provider eVestment. Photo: Reuters

Nishant Kumar and Macarena Munoz

Investor Crispin Odey, whose flagship hedge fund is on course to record its worst year since starting more than two decades ago, said money managers specialising in picking stocks and bonds are being driven out by "mindless" passive investing.

"This has been a difficult year for active managers," Mr Odey said in his November newsletter to investors. "Passive investing has taken money which typically would have been in the bond market and deposited it in the equity market."

Investors unhappy with the cost and performance of active funds are increasingly shifting to index and exchange-traded funds. They pulled $67bn (€64bn) from active mutual funds while adding $70.6bn (€67.5bn) to passive funds in November, the most in both cases this year, data compiled by Morningstar showed.

Hedge funds suffered net withdrawals of $80bn (€76.5bn) through December 16 this year, the first outflows from the industry since 2009, according to preliminary estimates from data provider eVestment.

More hedge funds closed than started in 2016 for the first time since at least the start of this century, when Eurekahedge started compiling the data.

A spokesman for London-based Odey Asset Management didn't reply to an email seeking comment.

The Odey European fund lost almost 48pc in 11 months to the end of November, more than the 43pc that it shed in 1994 as bets against stock markets failed to pay off.

In 2017 "central bankers will have to respond to what their governments are doing fiscally, rather than bolstering asset prices with low interest rates", Mr Odey wrote in the newsletter. "There could be trouble ahead." (Bloomberg)

Irish Independent

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