The vicious December sell-off, crowded trades, low trading volume even during market rebounds—these are signals to Clark that the market is about to crack. Which for him is good news. “The stars are aligning, and the markets are complacent,” he wrote in January. “Get the popcorn ready, it’s showtime.”
Clark has a front-row seat. He’s shorting the U.S. dollar on a number of bets. He’s trained his skepticism on U.S. shale companies, which he calls “capital destruction machines” that produce oil but no money. Then there’s his wager that autocallables, complex equity-linked securities that aim to generate regular income for their buyers, are going to collapse and volatility will soar. Investors hungry for yields have piled into autocallables, artificially suppressing stock market instability. This, he says, is “unsustainable and will end badly. I’ve seen it twice, three times even. And it feels so close to that inflection point. Everyone’s in the same trade.”
Born and raised in Canberra, Australia, Clark almost wasn’t allowed into the U.K. In 2002, in his second year as a full-time UBS employee, he landed in London on assignment for a subsidiary company and focused on emerging markets. Customs authorities wouldn’t let him in because his salary, in Australian dollars, didn’t make the cutoff when converted to pounds. They relented when he said UBS would pay his rent.
By 2006, Clark’s fortunes had begun to improve. Horseman Capital recruited him to start an emerging-markets hedge fund. His big break came in 2009 when John Horseman, the firm’s founder and a highly successful global stock fund manager in the 1990s, retired from the business at age 40 after losing 25 percent of the net asset value of his fund after the financial crisis. The firm’s partners got together and picked Clark to replace the founder as manager of the Horseman Global Fund. He took over on Jan. 1, 2010.
The transition was painful. The $3.2 billion fund that Clark inherited sank a staggering 96 percent, to $111 million, in just two years as clients, spooked by the management change, withdrew their money. By 2011, Horseman Global had shrunk so much that it was barely economical to run. Clark concluded in 2012 that if he didn’t become a short seller, there was no reason for clients to pay him the kind of fees hedge funds charge.
In 2013, when the S&P 500 index rose 30 percent, he made money by shorting Brazilian equities, which slumped. Shorting global fertilizer companies did incredibly well, and some long equity bets also paid off. That year, Horseman Global made 19.2 percent. Toward the end of 2014, the oil market broke, benefiting Clark’s short positions there and contributing to the fund’s 12.6 percent rise that year. In 2015, Horseman Global soared 20.5 percent, propelled by a continuing oil price slump, short bets that benefited when China’s stock market plunged, and long bond positions.
The year 2016 was a dream turned nightmare for Clark. He started out with a waiting list of potential investors. By the end of the year, Horseman Global had racked up a loss of 24 percent. In 2017 and 2018 clients headed toward the exits again.
Clark, who invests practically all of his own money in Horseman funds, takes the long view. In the nine years through 2018, his money pool has surged about 61 percent, beating the average 35 percent gain across all hedge funds. Reflecting on the bad times, he sees an opportunity. “I’ve been through a number of hero-to-zero periods,” he says. “When people hate you and write terrible things about you, it tends to be the best time to invest.”
It takes patience and trust to stick with Clark at a time when many investors seem to favor a team-led approach over individual managers. “This fund lives and dies with Russell’s macro call,” says Marcus Storr, head of hedge fund investing at Feri Trust GmbH, based in Bad Homburg, Germany, which manages €34.5 billion ($38.6 billion). “Every investor has to understand that his performance is mainly driven by directional investment ideas.”
And if any investors think Clark might change direction anytime soon, think again. “If you talk to any manager,” he says, “they always want to be bullish, and the classic line will be, ‘There’s always a bull market somewhere.’ My observation is there’s always a bear market somewhere.”