Hugh Hendry admitted he’s down this month while talking to BBC Hard Talk on Tuesday.
The often unhinged hedge fund manager was subdued until his interviewer began asking him about regulation and risk-taking in the hedge fund industry.
Then he got pretty riled up and spilled that he’s losing money this month, and how much it hurts.
It all started when the interviewer brought up financial regaultion.
“The financial industry is the most regulated sector in the economy,” Hendry says.
Then the interviewer suggested that hedge funds, like Hendry’s are less regulated and therefore riskier than banks.
To which Hendry replied, “The most effective form of regulation is that if you mess up, you fail. And that’s the regulation that I’m subject to.”
(Watch how the interview proceeds. Our summaries of the interviewer’s questions are in italics.)
Isn’t that very risky? asks the interviewer.
“I do not take extreme risk. Do you think for one moment [rich familes that have saved their money for generations] would give me their money to take extreme risks with it?” (circa 2:10)
Yes, I do think they would. I think that’s the premise that the entire hedge fund industry is based on.
“Extreme risk means that there is a very high probability of losing all of that capital.”
Well, that’s what has happened to many hedge funds recently.
(This is when Hendry starts getting upset. The suggestion of his clients’ money being at risk in his hedge fund.)
“I spend half of my time allaying their fears – being transparent, addressing their issues – Where could I lose money? How much could I lose?” (circa 2:54)
(Then we find out why he’s really upset.)
“I’m losing money this month – it’s a very uncomfortable process! My phone never stops!” (circa 2:58)
Hendry quickly went from the best macro fund (up over 13% YTD as of August) to losing money.