Hugh Hendry made millions out of the financial crash. Now he's a fierce critic of the markets and the Bank of England – and less than optimistic about the economic outlook.
"There are no more than five people in the world who understand money," declares Hugh Hendry. And, according to him, they do not include "billionaire hedge fund guys, conceited central bankers or the Bank of England – they've no clue.
"I cannot recall a time in my life when bankers called something correctly. Finance people don't understand money," he says. "It's f***ing complicated s***."
He doesn't claim to be one of the five either (though nor does he deny it) but he does, at this point, embark on a lengthy, impassioned and meandering monologue about inflation and interest rates, by way of Milton Friedman and Buddhism, which I try my very best (and mostly fail) to follow. Banks are "morons" for refusing to lend money "because of what happened 15 years ago", he says.
"Fine, raise interest rates again. Do you think really rich people are driving less?" he asks rhetorically. "Do you think they've turned the swimming pool temperature down? I don't. So the ordinary folk are getting it up the arse from this class trade war.
"Gold's a stupid thing," continues Hendry, who reluctantly admits to being 53, "if you're insisting on the old-fashioned thing about the Earth's rotation around the sun, etc," he says rolling his eyes. "Barbarous relic, is what Keynes called it." Nonetheless, he's now on to an anecdote about the time in 2003 that he visited Milan, bought a silver Prada suit, saw AC Milan play before velvet-roping it up at a VIP club, dreaming of The Wizard of Oz that night, then returning to London and purchasing pots and pots of gold.
A little over a decade ago, during the last bum-clenching financial crisis, the bombastic Hendry briefly achieved a rare feat for a hedge fund manager: a public profile. Generally a secretive, media-shy camp, few fund managers ever stick their head above their copy of the Financial Times, let alone give quotes to The New York Times, declaring, as Hendry did in July 2010, that, "If there was a way to short [the process of selling a borrowed asset in the hope that its price will go down and buying it back later for a profit] Obama, I would." Fewer still tussle on Newsnight, as Hendry had with former Danish Prime Minister Poul Rasmussen, the force behind proposed European Union regulation of the hedge fund industry and whom Hendry called a "champagne socialist travelling business class on the back of money created by risk-takers like me". Not one to be intimidated by a mere Nobel prize, he also clashed with American economist Joseph Stiglitz – again on Newsnight – over Greece's dire financial straits, asking Stiglitz, the former chief economist of the World Bank, "Erm, hello. Can I tell you about the real world?"
"I'm a truth-teller," says Hendry today, sincerely. "At the risk of being profoundly pretentious, I'm a macro artiste. I honestly can't explain it, but sometimes I see things play out before they play out." He casts himself not simply as some finance guy, but as a soothsayer of sorts, a Glaswegian, trucker cap-wearing, Camus-quoting nihilist who makes investments based not on economic numbers but on, well, 'the voices in my head.'"
For example, in October 2008, when all around him were losing not only their heads but also their fortunes and livelihoods, when the wives of the Lehman Brothers bankers were in tears at the gates of the private Notting Hill prep school all their children – including Hendry's – attended, his hedge fund was up 20 per cent in a day.
He had, he claims, seen the writing on the wall for years. He was, he says, shorting Lehman Brothers, along with the US Government-backed mortgage lenders Fannie Mae and Freddie Mac, back in 2003, five years before all three failed, triggering the most serious financial crisis since 1929. Ahead of the 2008 crash, he made a complicated financial investment, essentially betting that the federal funds rate – the rate at which banks lend to each other in the US – was going to fall to close to 0 per cent. "In the worst month for the stock market in history, I transformed a US$80 million loss to a US$100 million gain."
Not to doubt either the "voices" or his reading of the runes, but Hendry also declared in 2010 that he didn't "want to go and live in Switzerland or some Caribbean island". And yet, here he is today, zooming in from a sun-bleached patio on the Caribbean island of St Barts, storm lamps and palm trees swaying in the warm breeze behind him and the turquoise sea twinkling beyond.
Dressed seemingly in tribute to Bono – black square tinted glasses, black shirt generously open, man beads, bracelets, mullet – he is also sporting a black cap with his full name embroidered on it, lest I forget whom I'm Zooming with. He is stubbled, craggy, loopingly loquacious to the point of surreality – as if Irvine Welsh had created a hedge fund manager – with a Prince Harry-esque transatlantic twang, littering Ds where Ts should be: "Twidder", "creadive", "compuder".
Last financial crisis around, Hendry lived between London – where his wife, Mhairi, and their three children, Cameron, now 20, Caoimhe, 18, and Eugenie, 15, are still based, just off Portobello Rd in "Nodding" Hill – a grand apartment in Paris, and a six-bedroom, 100-acre [40.5ha] estate in the Cotswolds, complete with llamas and alpacas. For shuttling between London and the Cotswolds, he bought a Mercedes van and had the interior rebuilt to resemble that of a private jet, with giant TV screen, disco lights and reclining flatbed seats. He paid someone else to drive it, until Mhairi got tired of feeling travel-sick in the back and took over driving duties.
But, he says, "I traded all the time. It was unhealthy. It was all-consuming. I'd be on vacation and wake up in the morning, and I'd have been trading live markets in Asia all night and the evidence would be spooling out of the fax machine." And – perhaps not surprisingly for someone who made fortunes when global economies failed – he was "full of dread".
As a means of making a living, he likens running a hedge fund to "mortal combat". "Your brain can only react to your subconscious and to what you're directing to it, and my nervous system was saying, 'F***, we're going to die.' My brain was flooding me with noxious chemicals, and in the end I was exhausted."
Hendry finally wound down his hedge fund, Eclectica Asset Management, after 15 years in 2017, amid mounting losses. Even then though, he says, "the voices kept coming". So he launched a YouTube channel, featuring a series of short films, lavishly shot, of him skateboarding around Paris, riding a fairground carousel, and sitting in a bath, while making proclamations about life, finance and philosophy. This led to an Apple podcast series, The Acid Capitalist, in which he discusses global financial forces and holds hedge fund masterclasses.
The aim, he says, is to engage an audience that would not be found reading the financial pages (though they might be tempted to rebelliously buy a little bit of stock via the likes of Robin Hood). "All professions protect themselves by putting up this artifice of a wall, which is language," he says. And in finance "white, middle-aged, middle-class men talk down, talk in a code, scientifically, and people go, 'Yeah, I'm out of here.'
"It's wonderful to speak to the FinTweet community on Twitter, but it's a silo – my ambition is wider," he says. "If I succeed, kids, or whoever – people who only have disdain for banking and hedge funds – will go, 'Ah, actually I didn't know it could be like that.'"
To that end, Hendry has also recently finished writing a book, also titled The Acid Capitalist, a gallop through the ups and downs, gambles, gains and losses of his financial career. "I'm really into Hunter S. Thompson. I'm sitting here in the Caribbean, it's 80 per cent humidity, I like tequila reposado and I do get an urge to write things," he says. "I thought, 'Wouldn't it be fun to do a rock star-style memoir of being a hedge fund?' And to tell that different story where people go, 'Oh s***, that's kind of fun.'"
Raised first in a third-floor flat on the deprived Castlemilk housing estate in Glasgow, then in Erskine, a pebble-dashed new town northwest of the city, Hendry's upbringing was "not flush", he says, but he and his younger brother wanted for nothing. While his father, a lorry driver and shop steward, had no time for Margaret Thatcher, she did enable the family to get on the housing ladder, buying their council house for £7,000 ($13,000), which, he notes, felt like a "king's ransom".
A serious, focused child without any real friends, he didn't fall into even mild delinquency, just "worked my arse off", becoming not just the first person from his family to go to university, but, he claims, from his entire neighbourhood.
He chuckles. "The appalling thing about [writing] the book is that I have to confess that I studied accountancy at university." Accountancy, you might have gathered by now, doesn't quite fit with his Bono-meets-Hunter S. Thompson gonzo financier vibe. But in his fourth year of studying, he took a course in market-based accountancy research, during which he was introduced to a clunky Tempest computer with a Datastream feed, loaded with more than 100 years of financial and economic information, allowing the user to identify trends and generate and test economic hypotheses. "I was hooked."
After graduation, he was hired by the investment firm Baillie Gifford – its first non-Oxbridge or Edinburgh graduate trainee, he claims, the "Eliza Doolittle of the intake" – before moving to London with banking behemoth Credit Suisse. He was making plenty of money but was uninspired. Until, that is, he was sent along to a lunch with hedge fund manager Crispin Odey. He'd never met a Crispin before and had no real idea what a hedge fund was or did, but was struck by the way Odey spoke of "how Thailand was exposed, and that Russia had defaulted, and how there was a crisis engulfing us". It felt, "like a sermon being delivered from the mountaintop", says Hendry.
"Shame is the most overwhelming of emotional states and you should never be shameful," he has said of his own investment strategy, one that sometimes saw his fund's fortunes veer dramatically between losses of 15 per cent and gains of 50 per cent within a year. "I was a world-class loser. I was fearless of the consequences of being wrong and that's a very powerful thing."
His advice to other investors: keep emotions in check when making hard decisions. "There was this solo mountain climber and he gets his arm trapped and it's impossible to free himself," he said, recently. "We only have two arms, so in that situation you would procrastinate. You would not immediately cut off your arm.
"After about an hour or two he recognised that the only way he could survive would be to cut his arm off. That is investment," he said. "If you wait and hope, then you're going to be found dead on the mountain."
Far from being dead on the mountain, Hendry is today buzzing with vitality on St Barts, 26sq km of rocky outcrop featuring some of the world's most expensive property. In 2015, he built a house on the island, Blanc Bleu – a "preposterous", seven-bedroomed "Jay Gatsby house" that he rents out for up to US$250,000 ($403,000 a week, to Hollywood stars, F1 drivers and fellow finance sorts. "Billionaires fight over it," he boasts – not least because there are only 550 hotel rooms on the island, so "all the fun takes place in these extravagant villas".
He's six months away from finishing his second villa, which is next to the first, offering the squabbling billionaires the option to rent both, "because until the 1 per cent of the 1 per cent stop getting profoundly rich, the demand is, 'Oh, seven bedrooms is not enough.' So we'll have 13 bedrooms."
If that's slightly out of your budget, you can still buy a small slice of his St Barts lifestyle with one of Hendry's branded trucker caps, emblazoned with logos including "Acid Capitalist" and "Locals Only". The Acid Cap range costs an appropriately capitalist £81 ($154).
Property and headgear portfolios aside, Hendry claims to have shed many of his old accoutrements of wealth, including the Paris apartment, the Cotswolds estate and the llamas and alpacas; he drives an old Citroen 2CV around St Barts, flies economy, hikes, surfs, does yoga and feels "10 years younger".
Does he still watch the markets? "I don't read the Financial Times. I certainly don't have a Bloomberg terminal. But I do unconscious thinking," he says. "I get into the flow state – you've just got to unlock the mind." Hence the podcast, on which he chats with fellow financial observers. "Try as I might with all my surfing, my mind was still surfing the questions of, 'Hey, what happens next?'"
But, he asserts, "All hedge funds become the system." He sees himself as a pirate, and, "Once upon a time there was a role for cavalier pirates, then the pirates became the Royal Navy." That world, he says, is no longer fun. Some, I point out, might bridle at the idea that profiting from financial crises is fun – Hendry's old adversary Rasmussen, for one, called hedge funds "vultures". (To which Hendry argued, "You could say that when you see a vulture picking the bones of a springbok, it's picking the bones on a dead carcass. The vulture wasn't responsible for the death.")
"Why can't the pursuit of truth be fun?" he counters today. "Why does it have to have a negative connotation?
The day after we speak, the US Federal Reserve raises interest rates for the fourth time in seven months. A week later, the Bank of England raises UK interest rates 0.5 percentage points to 1.75 per cent, the biggest jump in 27 years. The dizzying prices of fuel, energy and household groceries dominate the front pages. Stock market warnings are dire.
"I fear markets are going to be as bad if not worse than what we saw in 2008," Hendry says. "I've never seen a confluence of such bad policy-making and lack of wisdom."
So what can the average person do to protect themselves, to shore things up?
"Kind of not a lot," he says. He believes, however, that the government could do a lot more, starting with using taxation to create a sovereign wealth fund for the disenfranchised. Which, I have to say, does sound a little disingenuous coming from a millionaire sitting on the deck of his luxury villa in St Barts.
Later, he emails me: "I feel that I failed to answer your question regarding what 'ordinary' folk should do about the dire economic situation today," he writes. "I should have said, 'I recommend you panic!' It's exactly the opposite of what everyone invested in the status quo, the experts, would say. The status quo is profitable for them." I detect no discernible panic on the sun-drenched deck.
In his book, he makes the (deliberately) provocative remark that "a good trade is better than sex". So, now that he's no longer trading, what's he replaced that with? "Sex," he rattles back, grinning. "A wishful answer. You replace it with St Barts. You replace it with social media. Being happy, not fearful. Not surviving for dopamine. There's serotonin instead.
"I could go out there and try to raise money again," he shrugs. "But I don't. I'm kind of healed from that."
The Acid Capitalist podcasts are available on Apple podcasts.
Written by: Jane Mulkerrins
© The Times of London