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Brexit Joins List of Winning 2019 Trades for This Fund Manager

John Ainger

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It’s not over yet, but 2019 has already been a year to remember for Richard Hodges, a fund manager at Nomura Asset Management.

A “super long” position on British banks is his latest trade to come good after an upswell of optimism over a potential Brexit deal powered through U.K. markets Friday, sending the stocks and bonds of domestic lenders rallying and giving the pound its best two-day performance since the financial crisis.

That follows other seemingly high-risk bets on Italian and Portuguese bonds that have also paid off, giving his Global Dynamic Bond Fund a 15% return this year and putting it in the top 2% among its peers. Investors have noticed, nearly doubling Hodges’ assets under management to $702 million from $420 million less than four months ago.

“My fund will have a lift off higher again,” Hodges said in emailed comments. “Everyone was short and expecting a full hard Brexit. I was not long the pound -- it wasn’t worth the risk -- but I am however super long U.K. banks, which is proving to be extremely fortuitous.”

Hodges didn’t specify which banks he is holding. Royal Bank of Scotland Plc’s stock climbed 11% and its 1.75% senior bond due 2026 rose 0.9 cents for its biggest gain since June. Lloyds Banking Group Plc and other U.K. lenders also climbed after European Council President Donald Tusk suggested that a Brexit deal is possible and detailed talks were set to begin.

The euro-area sovereign bonds that are Hodges’ key assets have surged this year as the European Central Bank plans to resume asset purchases. Portugal has won rating upgrades and a new Italian coalition government has reduced budget risks, leading those nations’ bonds to top regional gains.

The track record is helping drive Hodges toward his goal of a $1 billion fund. Hodges said earlier this year that he could liquidate 40% of his fund in two minutes should things get hairy.

To contact the reporter on this story: John Ainger in London at jainger@bloomberg.net

To contact the editors responsible for this story: Paul Dobson at pdobson2@bloomberg.net, Neil Chatterjee, William Shaw

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