To protect clients' money ought to be the basic objective of wealth management, and a firm that seeks to understand long-term macro trends prides itself - so far - on achieving that target.

Sudden jolts to global markets from events such as China’s currency devaluation last week or Switzerland’s sudden abandonment of its Swiss franc cap in January are reminders of how it pays for canny investors to try and watch for potential turning points.

Market timing is, so it is often said, a mug’s game: there is a lot of wisdom to be found with hindsight and trying to find inflection points in complex, even “chaotic” conditions is fruitless. But is it such a forlorn venture to see potential turns, or at least think of scenarios where changes occur and then try and ride the change?

A firm that argues that looking for such big changes is worthwhile is Eclectica Asset Management, a UK-based firm that describes itself as a high-conviction, macro-investment investment business.This fund invests across all asset classes, catering for both institutional and private clients. As well as the offshore vehicle, the firm also manages two onshore UCITS funds (called Global Macro and Agricultural Equity) and individual client managed accounts. In total, it oversees about $300 million of assets under management.

This publication recently sat down with three of the firm’s most senior figures at its High Street Kensington offices: Hugh Hendry, chief investment officer and founding partner; George Lee, portfolio manager/head of research and partner, and Tim Arengo-Jones, chief executive and partner. In Hendry’s case, he has more than 20 years of experience at the investment coalface, having worked at Odey Asset Management, where he was a partner and run several portfolios, Credit Suisse and Ballie Gifford. Lee has also worked at Odey. All three men were founding partners of Eclectica.  

Lee, in setting out how the firm goes about its job, gets straight to the point: “The intellectual views we take have always been very striking. Hugh [Hendry] was very early in moving into the commodities trend, then went bearish in 2006 and called 2008 [financial crisis] very well. Our views are usually very long term.”

Commenting on Eclectica’s main fund, Lee argues that it has a zero correlation in performance terms with equities. In other words, over the long term, an investor is able to obtain the kind of genuine diversification that is so keenly sought at the present time.

The Eclectica Fund aims to return about 8-10 per cent a year, he said (after fees).

“We have asymmetric returns on the upside…when we get it right, we get it very right. When we get things wrong, we are very quick to take risks out,” Lee continued.

Philosophy
When this publication asked the firm about its overall approach to investing, the partners say their investment horizon is up to two years, which they argue is much further out than most macro fund portfolio managers.

This, the managers say, gives the firm the confidence to try and peer through the “fog” of daily market noise to position for market changes and profit from mis-pricings in markets.

The firm said its Eclectica Fund is one of the longest-running global macro funds when compared to many of its peers. Its core investment team has been together for 13 years, which counts as longevity in the sometimes revolving-door culture of modern financial markets.

Arengo-Jones pointed out that for brief periods the fund has not made clients money but it hasn’t, crucially, lost it. The flagship fund had a flat year in 2013, down less than 0.005 per cent on the year.

The Eclectica Fund can take business from high net worth individuals to larger institutional investors, with a minimum commitment per client of €100,000 ($113,533); there are no lock-ups, it offers monthly liquidity with a seven-day notice period. The fund’s administrator is SMT Fund Services of Ireland.

The fund charges a standard hedge fund price structure of 2 per cent for annual fees and a 20 per cent performance fee, with an institutional share class pricing structure of 1 per cent and 15 per cent, respectively.