Mind of a Hedge Fund Manager: Inside Hugh Hendry's Head

The Eclectica Chief holding court

When it comes to media appearances, major hedge fund managers can be a rather reclusive lot. Unless your name happens to be Hugh Hendry.

During this week's Alternative Investment Conference in London, the iconoclastic speculator waxed philosophical about his own "self loathing" and the "voices inside his head", described indirect ways to play the Chinese property bubble, and explained how desperate he is to "see inside the envelope waiting in the future which contains my 10-15-20 year performance results".

Hendry's keynote was facilitated by author Steven Drobny, who explained that his goal for this interview was to "get inside the head of Hugh Hendry". Also of note, Drobny publicly revealed for the first time that Hendry was in fact the anonymous 'Plasticine Man' featured in his recent book Invisible Hands: Top Hedge Fund Traders on Bubbles, Crashes, and Real Money.

While Hendry declined Drobny's Freudian-esque invitation to recline on a couch brought up on stage specifically for him, he did play along with Drobny's word association game. When prompted with the names Ben Bernanke and Vladamir Putin, the same two words popped out of Hendry's mouth: "evil genius". What does that reveal about the way Hendry thinks? Perhaps not as much as the below conference highlight reel which was dubbed "Hugh Hendry's Greatest YouTube Hits".

Hendry's growing notoriety has managed to attract attention on the other side of the pond. In a NY Times profile last summer the Eclectica boss quipped “If there was a way to short Obama, I would”. At the conference he clarified that his remark was not directed at President Obama personally per se, just his policies.

For Hugh Hendry followers much of what he said at the conference may be familiar, but here are a few of the highlights:

• The euro is "mortally wounded but can limp on for awhile at the expense of ordinary people, making it expensive to speculate against".
• His best trades are the ones where he doesn't "fear the consequences of being wrong".
• He's not positive (bullish) on any country.
• In his own opinion, one of the keys to his success is that from an early age he was "taught to misbehave".

When it came to talking specific investments themes, Hugh outlined his bearish stance on China: "the only thing unique about China's economic strategy are the sheer numbers". Fundamental to his bearishness is the fact that so much capital in China has been directed for sovereign, rather than purely economic purposes. 

He compared China to a "sun moving other planets", and that "it's best not to short the mainland but instead short the satellites" or "dark side of the moon" as he called it. As such Hendry has a significant "basket" of Japanese credit default swaps with a four year time horizon. He discussed the evolving Japanese steel industry and his expectation that Japanese steel exports will contract significantly in the years to come.

Like Jim Chanos, he is extremely bearish on Chinese commercial real estate and even provides a guided tour of empty Chinese high-rise buildings in the below video.

Whether or not Hendry's bets will pan out within his time frame is an open question. But what is without question is that the financial world is certainly a more interesting and entertaining place with the outspoken Hugh Hendry.