Crispin Odey, a hedge fund manager who donated money to the campaign for the UK to leave the European Union (EU), has, in the aftermath of the vote for Brexit, invested in a way that means he will profit if investor sentiment turns against the country.
Mr Odey has put money on the value of sterling and UK government debt falling.
It is likely that a “no deal” Brexit would cause sterling and UK government bonds to fall sharply in value as investors pull their money out of the country to avoid the potentially damaging uncertainty that would likely follow.
In that scenario Mr Odey would profit from his position.
According to FTAdviser's sister publication, the Financial Times, Mr Odey, through his €173m (£150m) European fund, has taken a leveraged short position in UK government bonds.
This means he has borrowed some of the bonds now, and sold them, with the intention of replacing those bonds at a fixed date in future, by which time he hopes the price at which UK government bonds trade will have fallen, generating a profit for the fund.
The investment is leveraged because Mr Odey has borrowed to carry out the investment. This magnifies any gains, but also escalates any losses.
The value of sterling fell sharply in the immediate aftermath of the UK voting to leave the EU, but has since recovered to closer to its previous level.
The UK 10 year gilt has also performed strongly in the past 12 months, rising by 32 per cent.
The fund manager is also a long-term critic of the policy of quantitative easing, and has taken a very cautious view on the outlook for the global and UK economy as a result of the policy of quantitative easing.
That cautious view has hurt the performance of his funds, with the European fund losing 62 per cent over the past three years to 11 April.
The performance has been much stronger this year to date, returning 12 per cent at a time of severe market strife.
Mr Odey has taken the view that QE has created wealth inequality which has boosted asset prices but not helped ordinary people, creating political discontent.
The Bank of England’s view is that its monetary policy contributed to economic growth, and so had an overall net positive impact on the economy.
If his analysis of the impact of quantitative easing is correct, that it has boosted asset prices, then the withdrawal of QE, which happens as interest rates rise, should cause asset prices to fall.
If the UK economy were to perform particularly well after the UK leaves the EU, then it is likely the pace of quantitative easing being unwound would speed up, and that is bad news for bonds.
Quantitative easing ending means central banks buying fewer bonds, but with most major global economies continuing to run budget deficits, the supply of government bonds is increasing, supply increasing faster than demand pushes the supply of such bonds downwards.