JPMorgan cuts ties with Odey Asset Management

JPMorgan is terminating its relationship with Odey Asset Management, the last of the big banks to cut ties with the firm in the wake of sexual misconduct allegations against its founder Crispin Odey.

The US bank’s move added to the turmoil to hit the firm, which told clients it had closed Odey’s Swan fund and had stopped investors from withdrawing money from two others run by its subsidiary, Brook Asset Management, because of a higher volume of requests to withdraw.

JPMorgan has served notice on both its prime broking and its custody agreements with Odey Asset Management, according to people familiar with the situation.

JPMorgan declined to comment. Odey Asset Management declined to comment.

JPMorgan was one of Odey Asset Management’s key relationships. Its termination of its relationships with the hedge fund follows a Financial Times investigation that reported last week that Odey was facing allegations of sexual assault or harassment from 13 women, which he denied.

Prime brokers offer a range of services to their hedge fund clients, including stock lending, leverage and trade execution. Custodians safeguard their clients’ assets.

Morgan Stanley, Odey Asset Management’s other main prime broker, moved to cut ties with the firm last week, as did Goldman Sachs and Exane.

But JPMorgan’s relationship with Odey Asset Management is more complicated because as custodian of its assets, it needs to find another party to take on these assets as depositor, the people said.

Meanwhile, Odey Asset Management said it had closed Odey’s Swan fund and had stopped investors from withdrawing money from a couple of other products run by its subsidiary Brook Asset Management, which was set up in November 2020.

Odey Asset Management said it was liquidating the Swan fund, which manages €117mn, and returning money to shareholders after the founder was ousted over the weekend from the firm he set up in 1991.

Odey Asset Management also told clients that it had gated redemptions in its Brook Developed Markets fund owing to a higher volume of requests to withdraw.

Link Fund Solutions, the administrator to a number of Odey Asset Management funds, said it had suspended dealing in another product, the Brook Absolute Return fund.

The measure to halt customer withdrawals is one of the emergency actions taken by Odey Asset Management to contain the fallout. On Sunday, it announced that Odey would stop managing his funds and be replaced by other fund managers.

Odey Asset Management said the gating decision was taken after redemption requests exceeded 10 per cent of the Brook Developed Markets fund’s net asset value. The fund, managed by James Hanbury and Jamie Grimston, runs $205mn of customers’ money.

The board said the redemption gate was “in the best interests of all shareholders”.

The fund, which has risen 8 per cent over the past year and has an ongoing charge of more than 1 per cent, counts office company IWG, investment trading business Plus500 and retailer Frasers Group among its top holdings. Its highest sector weighting is in consumer stocks, followed by financial services companies.

Link told clients it suspended the issuance and trading of shares in the Brook Absolute Return fund as it was “in the best interests of all investors” after considering “all relevant circumstances regarding Odey Asset Management”.

Odey Asset Management also faces a broader investigation by the Financial Conduct Authority, which opened a probe into possible “non-financial misconduct” at the hedge fund two years ago. MPs are planning to scrutinise the FCA next month over its handling of misconduct allegations relating to Odey.

Plus500 said in a stock exchange announcement on Tuesday that it had purchased £101mn of its shares from Odey Asset Management, representing about 8.2 per cent of its share capital.