Hedge fund manager predicts rally may be start of bull market

Crispin Odey, founding partner at Odey Asset Management and one of the hedge fund industry's highest profile figures, said: "Opinion is divided over whether this is a bear market rally or the beginning of a new bull mar- ket.

"I think it has the chance to be a new bull market.

"In little over a month much has changed", following a sharp rally in stocks led by banks and base materials stocks, he said in a note to clients.

Odey, who remains positive on banks, owns shares in banks such as Barclays and said he believed the bull market will extend from the banking sector, "to encompass other industries where capacity has been sufficiently reduced as to allow pricing power to come through".

The FTSE 100 index has risen 14 per cent since March 3, when it closed just above 3,500, on hopes that moves such as quantitative easing – the repurchase by governments of Treasury bonds – will help boost lending by banks and steer developed economies back to growth.

Last year Odey made money betting on falling bank shares, but in February revealed he has been buying into UK banks because he thought they looked so cheap.

Odey was one of the few hedge fund managers to make money last year, returning 10.9 per cent in his European fund while the industry suffered record performance losses of 19 per cent on average, according to Hedge Fund Research.

In August, his firm revealed profits of £55m, of which Mr Odey paid himself £28m.

Barclays was the biggest positive contributor to the performance of Odey's £770m European fund in March, adding 5.17 percentage points of the fund's 5.27 per cent gain.

"Everything is about re-establishing profit margins. My banks buy case demands only that net interest margins are rising, not that bad debts are falling," he wrote in the note to investors.

"Since on my numbers these banks are trading on between two and three times future earnings, two years out, I am not afraid of the volatility in the share price."