Hugh Hendry, the manager of Eclectica Asset Management thinks we should love hedge funds. In an interview in today's London Independent (see http://bit.ly/cV8izk ), he says:
"Say I buy insurance on your house burning down. I don't live in your house, so why on earth would I want to have anything to do with any future outcome there? Well, I'm not dumb. I give great consideration to spending mine and my client's money. So if I'm buying insurance that pays out on your house burning down, then there's a strong probability there's a fire hazard. I suggest you do something about it. You would perhaps discover that your wiring was faulty and replace it. If you do, my curiosity and information has helped to prevent a catastrophe."
I was astonished to read this. Dear Hugh is supposed to be a very intelligent man, but he seems to have missed a few important points here:
1) If I heard that someone had done this with regard to my house, I would instantly recognise that he was either a criminal or mentally ill. Any normal person who realised there was a fire hazard would tell me about it, so that I could take necessary action. Only a deranged person would instead take out insurance, betting that my house was going to burn down.
2) No insurance company would allow someone who has no material interest in my house to insure it against burning down. This is because they recognise that to allow this would encourage people to take out such insurance, then burn my house down.
So, we are left with the following possibilities with regard to Hugh Hendry:
1) He is stupid.
2) He is mentally ill.
3) He is ignorant of elementary facts about how insurance works.
4) He is a criminal.
Maybe there are other ways to interpret this, but I can't see what they could be. If you can, please help me out!
Whatever is the case, I certainly would not wish to invest in a fund managed by this chap.
subscribe