There is a belief popular with some Remainiacs that Brexit backing financiers – particularly those who donate to Brexit causes – are doing so to profit. Somehow they will make a killing when Brexit goes disastrously wrong and that is the reason why they are funding Brexit causes. The latest manifestation of this is that Crispin Odey is short* £300 million of shares in British companies, proof that he stands to make a killing when Brexit collapses the economy. Literally caught short!

Guido has not spoken to Odey for this article. It is however well known that he runs a long/short fund. A common strategy of such funds is to do pairs trades; a trader might go long Fed-Ex shares and short Royal Mail shares because he thinks Fed-Ex will do better than Royal Mail whether the general market goes up or down. Even if both shares go down he expects Royal Mail to go down more, even if both go up he expects Fed Ex to go up more. The difference between the moves – the spread – is where his profits or losses will be made. The difference in the shares’ relative performance.

Sometimes long/short funds will short a stock versus the general market. If the market goes up more than the shorted stock, they profit. The reason the financial press knows Odey is short £300 million of shares is that funds have to make regulatory declarations of short interests. They do not have to declare their long interests unless they become so exceptionally large as to be notifiable interests. However we know that Odey has billions under management. It is therefore very likely that his firm is net long the UK stock market given he has only £300 million in declared shorts. Not a position you take if you expect disaster.

Odey is often reported as having made millions from the referendum. Guido is sure Crispin is happy for potential investors to think that. However the facts are that his Swan Long/Short Equity fund lost 42.1% in 2016 and 21.8% in 2017. It has only just started clawing back losses by some 39.7% in 2018, leaving it well down since the referendum. So much for profiting from Brexit…

*Shorting is when you borrow and sell shares in the hope of buying them back later at a lower price. Hedge funds were originally so called bcause they hedged a short position against a long position.