Russell Clark’s entry into the high-stakes world of investing could hardly have been less promising. As a graduate trainee at UBS Group AG in Sydney, he was wowed by friends getting rich by day-trading tech stocks in 2000. So he spent his first few paychecks on five dot-com shares. Four crashed to zero, and the fifth lost half its value as the tech bubble burst.
That lesson was so brutal that it helped turn Clark, now 45, into a career contrarian. These days the hedge fund he runs for London-based Horseman Capital Management is prepared for a market crash. It’s an audacious contrast to what’s been the most popular trade in town for years: wagers that stocks will keep rising. What’s more, with a resolve virtually unheard of in the industry, he’s been betting on stock declines for more than seven years.
In a world dominated by ultralow interest rates and central bank interventions, bearish strategies have led to excruciating losses for hedge funds. During each of the past three years, more hedge funds have closed than have opened. Yet Clark remains convinced that a crash is near. And if he’s mistaken?
“This could be my farewell interview,” he says.
Clark is slumped casually in a chair at Horseman’s offices inside a small, unassuming house in a quiet mews near Buckingham Palace Gardens. Then he brightens, stalwart in the belief that his fund, Horseman Global, is going to be all right. “But if my views are correct,” he says, “it’s not going to be good for anyone else.”
Of late, persistently buoyant equities markets have tested Clark’s skepticism. Horseman Global lost 15 percent of its value in the first quarter as the S&P 500 index climbed 13 percent. Clients are fleeing. Assets have halved, to $690 million, in the previous two years.
But Clark is holding steady. His contrarian thinking has withstood a decade-long bull market. He’s been net short equities since 2012 and made money. In each of the S&P 500’s worst five months since 2012, Horseman Global earned bumper profits. And in the most recent sell-off, in December, when the index suffered its biggest loss since early 2009, Horseman’s fund surged 13.5 percent.
Clark isn’t a name that most mom and pop investors would recognize. But within the confines of the hedge fund world, he’s a star. His video interview last year on the Real Vision subscription website was one of the most requested of 2018.
His fund is a roller coaster ride: Losing or gaining more than 5 percent in a given month isn’t unusual. It’s not for everybody. “He has made money over time, and some people love him, but we found [his fund] to be a bit too volatile,” says Rob Hawcroft, a former executive at HSBC Asset Management’s alternative investing unit, which invests in hedge funds.
Tim Ng, chief investment officer of Princeton, N.J.-based Clearbrook Global Advisors LLC, says his fund pulled its money for similar reasons. “The stretches of negative performance and the high volatility of monthly returns became a consistent drag on our portfolio’s overall return, which prompted us to redeem,” he says.