Business

Crispin Odey: How Kwasi Kwarteng’s ex-boss is cashing in on Sterling’s crash

With mortgage rates soaring and the cost of living crisis worsening in the wake of Kwasi Kwarteng’s mini-budget, some politicians and their friends in the city continue to rise above the economic storm — and even take advantage of it.

One investor making millions out of the financial crisis is the new advisor’s former employer: high-profile hedge fund manager Crispin O’Day.

The Odey Fund is betting that the cost of government debt will rise, and that’s exactly what’s been happening — especially since last Friday’s controversial mini-budget.

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But even before the chancellor’s comments sent Britain’s government bonds tumbling, Reuters reported that Odey Asset Management rose 145% in 2022, thanks to its bet on bonds.

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Friday’s unfunded tax cuts pushed up the cost of government borrowing as investors in government debt demanded a higher rate of return on their money due to concerns about the increased risk of lending to the government.

It’s not clear exactly how much Odey’s fund made betting on government bonds (also known as gold bonds), but the fund’s performance appears to have rebounded in recent weeks, just as things have worsened in the economy.

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In the aftermath of Friday, the yield – the rate the government needs to pay investors to borrow their money – on 10-year government bonds went from around 3% to more than 4% in just four days. The increase in returns during September is one of the largest monthly increases on record. Returns at the beginning of the year were closer to 1%.

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