Hedge Funds

Fund manager Hendry says German property is ultimate Brexit hedge

LONDON (Reuters) - Outspoken Scottish hedge fund manager Hugh Hendry says he is investing in residential German property as it can survive any “vial of poison” the market throws at it, and will gain whether Britain leaves or stays in the European Union.

The founder of London-based Eclectica Asset Management says German real estate values can ride out, and even benefit from, scenarios including a British exit from the EU, a shock Chinese currency devaluation or the breakup of the euro zone.

He believes German property will appreciate if Britain stays in the EU as the bloc will be strengthened, whilst it will also benefit from falling German bond yields if there is a Brexit.

“If the EU is to preserve, then German asset prices should appreciate and at the same time, I know that the cheapest asset in the world, relative to the prices of its domestic bond market, is German property,” Hendry told Reuters in an interview.

Hendry is not alone in liking Germany property, with low interest rates contributing to an average rise of 5.6 percent per year over the last five years, according to UBS, twice the annual rate of increase since 1970.

Prices for apartments in Germany’s top seven cities rose 14.5 percent last year, according to research institute Empirica, the biggest increase since 2000.

Hendry left Odey Asset Management in 2005 to start his own firm and oversaw $1.3 billion at the 2013 peak before shedding assets after several years amid flat performance. He now manages $200 million for a range of wealthy and institutional clients.

Despite not putting any stock in the conviction of peers George Soros and Crispin Odey that China will devalue its currency by 20 percent, Hendry believes that even if he were wrong, German property would weather that too.

“If it was the devaluation of the yuan, I think you would come full circle and come back to a huge currency crisis in Europe. The euro would break up and I would end up owning German property, which would now be valued in Deutschmarks,” he said.

Reporting by Maiya Keidan; Additional reporting by Tina Bellon; Editing by Simon Jessop and David Holmes