Crispin Odey is probably the UK’s best known big shorter – often making bets within his investment funds that are wildly successful when markets or individual stocks fall.
He is not always right – and sometimes mistimes his bets. He went bearish on the stock market too soon last year, for example, and his bets suffered the consequences.
But investors who are happy to share a bumpy ride can take a punt on his funds.
High profile: Crispin Odey is the City’s best known big shorter
Apart from Odey’s flagship Macro hedge fund (open only to seriously wealthy investors) his firm has a range of retail offerings targeted at individual investors which use shorting. They can be bought through any broker from as little as £100.
Jason Hollands, of broker Tilney, says: ‘Hedge funds can physically short-sell a share by borrowing it off a long-term holder such as a life insurance fund to then sell it – and then buy it back later (hoping it will have fallen) and return it within an agreed time to the lender.
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‘Traditional investment funds are not allowed to short this way. Instead they take positions ‘synthetically’ by buying derivatives such as contracts for difference.’
Darius McDermott, of broker Chelsea Financial Services, warns investors to be wary of funds that short. He says: ‘They are volatile so investors need to be fully aware before committing any money. You do not need to be rich to invest in Odey’s retail funds, for example. But it does need to be money you can afford to lose.’
Other funds that short stocks but are less volatile include Smith & Williamson Enterprise and Janus Henderson UK Absolute Return. McDermott says: ‘The managers of these funds have good long- term track records in terms of shorting stocks.’
Hollands recommends Artemis US Absolute Return, BlackRock UK Absolute Alpha and Jupiter Absolute Return.
He is also interested in a new offering from US fund manager Neuberger Berman, which has just entered the UK market with its TM Neuberger Berman Absolute Alpha fund.
Hollands adds: ‘It is co-managed by Steve Eisman of The Big Short fame. He takes strong views and I think this fund will be aimed at investors who want to turbo-charge returns.’
Another route to shorting at an affordable price is through investment trusts, which are traded like shares on the stock market. A cohort of trusts often use shorting as part of their investment strategy.
According to the Association of Investment Companies, 19 trusts have held at least one short equity position in the past year. They include BlackRock Throgmorton, Fidelity Special Values, BlackRock Frontiers and Gabelli Merger Plus+ Trust.