Case Study - Odey Absolute Return Fund

The Odey Absolute Return Fund is long/short equity Fund investing (primarily) in the developed markets of Europe and North America, with a bias towards the UK.  The Fund was launched in May 2009.

The fund is long biased, with the manager actively managing the balance sheet to react to changing fundamentals and the market environment.  From a long perspective, the manager seeks to invest in companies that are market leaders, with a defendable position, strong earnings visibility and brand strength, prudent accounting measures, a conservative balance sheet and be operating in a sector with falling capacity and firm prices.  From a short perspective, the manager seeks to identify companies with significant long term structural headwinds and which are vulnerable to earnings disappointment and multiple compression.  

Portfolio construction is guided by making certain that capital is allocated to stocks furthest away from their intrinsic value. A stock that has good liquidity, no balance sheet risk and that offers 100% upside to its current intrinsic value will typically be allocated a 5% weighting in the fund.

The team generally have a value bias, preferring low earnings multiples, low EV/Sales, margin growth, low price to book, etc. The manager looks for situations where the market is misunderstanding and mispricing a company’s prospects.

The Fund is managed by James Hanbury.  James is a Partner at Odey and Head of the Research team.  He joined Odey in October 2008 and was made a Partner in March 2009.  Prior to joining Odey, he spent two years as a partner and portfolio manager at ZA Capital, an equity hedge fund. Before joining ZA Capital, James was an equity analyst at Schroders for three years covering the retail and leisure sectors.

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