Eclectica to close Hendry’s Europe fund

Eclectica Asset Management is to close Hugh Hendry’s CF Eclectica Europe fund, according to letters sent to shareholders.

The proposed closure date is understood to be 26 August.

The Eclectica Europe fund was formed in 2009 from the merger of the CF Eclectica Continental European fund and the CF Eclectica European Fund, two Hendry-managed funds launched by the firm to target the UK retail market in April 2006. It currently has just £6.1m in assets.

The fund is third quartile over three years, according to FE, having returned 10.24% versus an Investment Management Association Europe ex-UK sector average of 12.43%, and fourth quartile over one year, returning 7.57% versus a sector average of 11.66%.

Hendry will continue to manage the firm’s flagship offering, the $239m Eclectica fund, as well as the £166m CF Eclectica Agriculture fund and the £29m CF Eclectica Absolute Macro fund, which sits in the IMA Absolute Return sector.

Earlier this year Eclectica adjusted the parameters of the Absolute Macro fund, introducing a value at risk reporting metric that permits Hendry to take more significant positions in interest rate and bond futures.

In his latest commentary on the Eclectica fund, Hendry said his use of forward steepeners provide the fund with profit opportunities under “diverse and contrasting scenarios”.

“Conventional pre-trade risk analytics can fail to capture the ambidextrous nature of such profit opportunities,” Hendry said.

The manager noted such gearing techniques have enabled the portfolio to benefit from a weakening in US economic expectations of late, but argued he is also well positioned for other events.

“We like the proposition of no change to the yield curve. Call me a sloth but a position that makes you money if nothing happens will always be near the top of my preferences.”

“It is the steepness of the curve that affords the position its substantial margin of positive carry”, Hendry said. Postive carry is a feature of “almost all of our rates trades”, he added.

“To summarise, we could make money if there is a growth shock to the downside, we could make money if the curve remains constant and we could make money if the economy has legs and the suspicions of the “gold bugs” are correct and the Fed has no credible exit policy. Who would have thought ambivalence could prove so rewarding?”

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