FOUR out of five hedge-fund managers had expected Britain to vote to remain in the European Union, according to a poll by Preqin, a data firm. But a handful saw Brexit coming and invested accordingly. They made hundreds of millions by betting against assets that were likely to suffer from an Out vote. Crispin Odey’s London-based fund, which manages around $10 billion and has had a terrible year, jumped nearly 15% on the day after the vote. That was thanks to short positions on the shares of a number of British firms (including Aberdeen, an asset manager, and Berkeley Group, a builder) and a big investment in gold. Others, such as Atlantic Investment Management, prospered by betting against sterling, which fell this week to its lowest value against the dollar since 1985.

Another successful approach was to do what hedge funds were originally set up to do: hedge (not many do these days). “Did we see it coming? No,” admits Lukas Daalder of Robeco, a Dutch asset manager, who says he was able to limit damage by recognising the vote was too close to call. He tried to surprise-proof his portfolio by betting that sterling would fall against the dollar and by...Continue reading