Odey Asset Management is grappling with the complexities of splitting up with the man whose name is on the door while early signs indicate clients and business partners aren’t waiting around to find out.
(Bloomberg) — Odey Asset Management is grappling with the complexities of splitting up with the man whose name is on the door while early signs indicate clients and business partners aren’t waiting around to find out.
The London-based investment firm, which manages about $4.3 billion, said on Saturday that it had fully divorced itself from its founder in the wake of sexual assault allegations. That didn’t stop a wave of client redemptions on Monday forcing a fund closure and the gating of two others. The reality of the separation may prove more complicated given that Crispin Odey, 64, is its founder, longest running fund manager, public face and one of its largest clients.
The move by the privately held asset manager to sever links with its namesake has little precedent. Retirements of such foundational figures are usually years-long processes. Even when Apollo Global Management Inc. co-founder Leon Black left amid damaging scrutiny for his private business dealings with convicted sex offender Jeffrey Epstein, the firm had already gone public and Black had identified a successor.
For many, Odey Asset Management is Crispin Odey. And now that the three-decade-old firm has moved swiftly to break that tie, it still faces an existential question: will it be enough?
“Odey without Crispin is just another asset management firm,” said Jacob Schmidt, who runs his investment advisory firm Schmidt Research Partners. “Crispin was involved in so many funds and while there is a deep bench of talent the transition to no-Crispin will be tough.”
The unraveling was triggered by the publication Thursday of a Financial Times investigation into Crispin that included multiple allegations of sexual harassment and assault. In the day that followed, the asset manager’s Wall Street banks and some investors moved to cut ties with the firm.
The firm moved to contain the crisis on Monday by shutting one fund and gating at least two others, just hours after saying it wasn’t considering suspending redemptions from any funds.
Odey Asset Management suspended all dealings in the Odey Swan fund and will redeem investors by Sept. 4. It also halted redemptions from the Brook Developed Markets Fund, which is run by James Hanbury and Jamie Grimston, after requests exceeded 10% of the fund’s net asset value, as well as the LF Brook Absolute Return Fund, according to separate letters to investors seen by Bloomberg News.
Read more: Odey Shuts Its Swan Fund, Gates Redemptions on Multiple Vehicles
In two letters to clients over the weekend, the investment firm has emphasized that Odey no longer has any economic and personal involvement in the partnership. It’s not public how the partners achieved the ouster of Odey – who owns 75% or more of the voting rights for Odey Asset Management, according to the latest filing with UK’s Companies House.
Read more: Odey Sacked From His Hedge Fund Firm After Assault Allegations
A person familiar with the matter said the partnership agreement gives its executive committee the power to make far-reaching decisions, including the appointment or removal of partners. The committee invoked those powers and the net result for Odey is that the capital he put into the partnership will be returned to him, ending his control and economic interest, the person added.
Odey did not respond to repeated calls and text messages seeking comment.
Moves by other stakeholders including the firm’s investors, the alleged victims, service providers, the UK financial regulator and Odey himself are still playing out.
Goldman Sachs International CEO Richard Gnodde said that the bank is “in the process of moving away” from its prime-brokerage relationship with Odey Asset Management after the removal of founder Crispin Odey, following a similar move by Morgan Stanley. JPMorgan Chase & Co.is also terminating its relationship, the FT reported Tuesday. Representatives for JPMorgan declined to comment.
“When new information comes to light in any situation, we’d obviously review it and review it quickly and then take the appropriate action,” Gnodde said in a Bloomberg Television interview recorded on Monday. “We’re in the process of of moving away from that business.”
Born into a well-known family — Odey’s grandfather was a Tory MP and his mother came from an old-line mercantile family — the University of Oxford alumnus started his firm in 1991. Odey Asset Management initially managed $150 million, including money from hedge-fund titans George Soros and Paul Tudor Jones.
In the years since, his flagship Odey European Inc. hedge fund, which will now be run by co-manager Freddie Neave, has swung between outsized gains and stark losses. Odey, a famously bearish money manager, had little investing success between 2015 and 2020 when his wagers repeatedly failed to pay off. Last year marked his best on record, a stunning turnaround.
“This company, with its unconventional strategies and rich history, is truly one of a kind,” according to Bruno Schneller, managing director at Swiss based INVICO Asset Management AG. “It’s my belief that client loyalty is primarily owed to these unique characteristics, and only secondarily to the person Crispin Odey.”
But Odey, who has for years been a tabloid fodder for everything from his support of Brexit, lifestyle, shorting the pound to predictions of doom in the midst of the longest bull market in history, has long represented so-called key man risk for the firm.
In recent years, allegations of sexual harassment and assault against women have emerged against him. In 2020 he was charged with, and later acquitted of, assault charges in British courts. New accusations against him surfaced soon after, with two women coming forward to Bloomberg News and another to the Times of London newspaper. Later, more appeared in a Tortoise Media podcast.
For investors, the question is what to do now.
“Like with Madoff, the hard question for allocators today is whether they were willfully blind to the reputational risk,” according to Andrew Beer, founder of Dynamic Beta Investments. “Do allocators really want to spend the next year waiting for lawyers to decide who was culpable and who wasn’t? The easy answer today is to shoot the wounded and move on.”
The UK’s financial watchdog — the Financial Conduct Authority — is in the midst of a two-year investigation into the asset manager, a person familiar with the matter said last week. That may be widened to encompass the latest allegations.
“We take allegations of non-financial misconduct seriously and expect firms to have adequate governance procedures in place that ensures allegations of misconduct are properly investigated,” a FCA spokesperson said in a statement, while declining to comment specifically on Odey.
What the FCA does next could determine whether Crispin Odey can continue managing other people’s money. To maintain his standing he must pass its fit and proper test that takes into account factors such as competence and capability, integrity and financial soundness.
Harriett Baldwin, chairwoman of the Treasury Select Committee, said the group of MPs may ask the FCA about Odey when it has its next session with the regulator next month.
“While the FCA is often reluctant to discuss individual cases in public, the topic of sexual harassment in regulated firms or by people they regulate is in scope of the wide range of topics that we cover in our accountability sessions with the FCA,” Baldwin said.
Before winning his case in 2021, Odey stepped down as CEO of the firm, which renamed several funds and created the trading name Brook Asset Management to market them. Now, the majority of the firm’s assets are managed by portfolio managers including Hanbury and Oliver Kelton.
On top of taking on full management of the flagship hedge fund, Neave will now additionally manage the OEI MAC fund. Hanbury will run the Odey Opus fund and Kelton has been given responsibility for the Odey Pan European fund, according to a letter to investors seen by Bloomberg on Sunday.
For Odey’s part, the next move is his.
“This development will hopefully persuade the majority of the firm’s counterparties as well as investors to stay put and not run for the exit, which absent Crispin Odey’s removal almost certainly would have been the case,” said Berlin-based Harald Berlinicke, the owner and chief investment officer of Max-Berlinicke-Erben family office. “Curious, of course, to see if the big man goes down without a fight.”
–With assistance from Katherine Griffiths and Michael J. Moore.
(Updates with details on fund closures, gatings from the seventh paragraph)
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