From Hedge Funds to Life Philosophies: A Conversation with Hugh Hendry

From St. Barts to our Confessions of a Market Maker studio, CMM brings you the legendary Hugh Hendry

Jul 20, 2023

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Feel Free to watch & listen to the Complete Interview with Hugh Hendry at Confessions Of A Market Maker

Introduction

In a recent podcast episode, Co-host Ray and JJ had the pleasure of welcoming Hugh Hendry, the founder and CIO of Eclectica Asset Management, a global macro hedge fund. Known for his successful identification of the gold bull market in 2003 and the housing debacle in 2008, Hugh has delivered annual returns of 30-50%. He's also a former hotelier and property developer.

The Eclectica Approach

Eclectica, as the name suggests, is a hedge fund that derives ideas, styles, and taste from diverse sources. Hugh explained that his fund had a low correlation to other managers and principal risk assets, making it an entertaining diversifier. His aim is to make money during moments of stress in the system and provide insurance-like returns.

Hugh's background at Baillie Gifford, where he gained discipline and worked with smart, growth-focused investors, played a significant role in shaping his approach. Baillie Gifford, he mentioned, was concentrated in their investments and experienced significant growth over the years.

The Journey to Eclectica

Hugh's journey to establishing Eclectica was not a straightforward one. He shared his experiences working in the financial industry, including being hired as a diversity candidate for a company managing $3 billion. Despite feeling out of place, Hugh found success in his role and developed a keen sense of predicting future events.

After leaving that company, Hugh joined a prominent hedge fund in London, where he encountered a flawed but brilliant individual who used charts to make investment decisions. This experience allowed Hugh to monetize his ability to anticipate future trends. He describes himself as a risk taker who constantly worries about losing money.

Trading and Investing Insights

Hugh shared his approach to trading and investing in the global macro market. He believes in developing asymmetric positions with fixed losses and potential exponential returns. He also shared his current contentious narrative, stating that he believes the inflation narrative is nonsense and that deflationary recession is emerging in parts of Europe and China. As a result, he has an appetite for owning US risk-free treasuries.

Globalization and Macroeconomic Rules

Hugh discussed the profound changes in globalization and its impact on macroeconomic rules. He highlighted the shift in China's industrialization policy, which has led to persistent trade surpluses, particularly with the US. He believes that this change in globalization has been responsible for the elevation of global asset prices and the inflation of asset bubbles.

The Power of Twitter

Hugh also discussed his use of Twitter as a valuable resource for information and insights. He curates a list of about ten people whose tweets he follows to avoid the noise of the financial press. He recommended following Professor Michael Pettis and Jeff Snyder for their expertise in globalization and its impact on asset prices and wages.

Life Philosophies and Personal Insights

The conversation took a more personal turn as Hugh shared his experiences and perspectives on dating and relationships. He emphasized the importance of finding someone who is a little bit crazy and not being interested in superficial looks alone. He also shared some of his life philosophies, including the recognition of the impermanence of life and the importance of not caring about what others think.

Conclusion

Our conversation with Hugh Hendry provided a wealth of insights into his approach to trading, investing, and life in general. His unique perspective and ability to bounce back from difficult experiences are truly inspiring. For those who want to connect with him, you can find him on his podcast, mentoring services, and social media accounts.