Hugh Hendry's Eclectica Likes Annaly Capital Management (NLY) ~ market folly

Thursday, March 25, 2010

Hugh Hendry's Eclectica Likes Annaly Capital Management (NLY)

Today we're covering the latest updates out of Hugh Hendry's Eclectica Absolute Macro Fund and their CF Eclectica Europe Fund as well. They recently posted up their February 2010 letter and we get some insight as to what they're investing in and how their portfolio is allocated. They've definitely made some position adjustments since the last time we looked at their portfolio.

Their commentary highlights their new addition of Annaly Capital Management (NLY) to the portfolio. They like this position because it has a dividend of 17% but point out that it does come with risks, including the possibility that the Fed aggressively raises interest rates (which would negatively effect NLY's business). This play sticks with Eclectica's overall theme that inflation is not a worry here and they see the Fed keeping interest rates low longer than many anticipate. Hendry is more worried about deflation than anything and he thinks Annaly is a safe play in the mean time because he does not anticipate an aggressive rise in interest rates. For more thoughts from Hendry, check out his insight from a recent investment panel.

We see that Eclectica's Absolute Macro Fund top 10 holdings are as follows:

1. Long EUR/short EEK: 21.8%

2. Long EUR/short LVL: 14.5%

3. German 30 year government bond: 10.3%

4. Annaly Capital Management (NLY): 5.1%

5. Long USD/short KRW: 2.7%

6. long USD/short ZAR: 2.4%

7. long USD/short AUD: 2.1%

8. long USD/short GBP: 2.1%

9. MetroPCS Wireless 9.25% 2014: 2.1%

10. British American Tobacco: 1.6%

As you can see, their top 3 holdings are highly concentrated and their brand new NLY stake is pretty sizable. Embedded below is Eclectica's Macro Fund February update and you can directly download the .pdf here:

Additionally, we wanted to post up an update from their CF Eclectica Europe Fund as well. That is embedded below and you can see their brief commentary and top 10 holdings as well, with a downloadable .pdf here:

Always intriguing to see what Hugh Hendry is up to with his various investment vehicles. For more on Hendry's funds, we've posted up some past Eclectica commentaries. Be sure to also check out his take on how he would invest $100 million as well as BBC's recent video of a day in the life of Hugh Hendry, which many of you no doubt will find amusing.

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