MW This award-winning hedge fund manager is betting the era of capital abundance becomes one of capital scarcity

By Jules Rimmer

Newly-launched hedge fund says buy gold and short fixed-income as rates inexorably rise

This fund manager thinks markets are too complacent about risk at present.

Despite only starting up Brumby Capital in May of last year, Russell Clark has already delivered a return of around 27% for investors and won a hedge fund industry award nomination as best newcomer to boot.

The launch of the new fund was, Clark explains, opportunistic. Having made his name as a contrarian, short-selling manager for large parts of his career Clark had taken a break from managing outside assets for a few years and was content to invest his own capital. Last spring, however, he saw an opportunity to exploit the chaos created by President Donald Trump's 'Liberation Day' to raise money from institutions and high-net-worth individuals looking to protect capital in an increasingly volatile investment landscape.

Russell Clark

Fundamental to Clark's investment worldview is his conviction that "the era of capital abundance has ended" and global markets are adjusting towards a new epoch of capital scarcity. This isn't just the current dynamic of hyperscalers' booming capital expenditure at work, though that is important. Clark, who spoke to MarketWatch on Monday, thinks deeply about politics and how they impinge on capital markets, "Trump's economic policies essentially exploit fixed-income investors" in the interest of short-term electoral expediency. This entails offering populist intervention, lowering taxes for companies and targeting higher wage growth for voters.

Clark believes that the interest rates the U.S. government can offer on their fixed-income securities must also now rise because "its hostile economic policies discourage trading partners from holding them as part of their reserves and this trend was exacerbated by freezing/ weaponizing of Russian bond holdings in 2022."

Betting on gold vs. Treasurys

The resulting higher interest rates, therefore, make most U.S. Treasurys , in fact most global government bond markets, unappealing. Clark suggests "many investors believe the inflation trade is over" but his analysis "points to the opposite." Other sovereign bond markets outside the U.S. also are unappealing, because they would suffer if the U.S. Treasurys do, he adds. When pushed, though, Clark could see that some high-yielding local currency emerging market debt EBND, like Brazilian bonds , might offer some value.

Clark's main bet therefore, is to be long gold (GC00) against short positions in government bonds. When asked about the best way to invest in gold, Clark prefers the simplicity and ease of exchange-traded funds rather than gold miners.

Although Clark accepts there is a rationale behind silver (SI00) as an alternative to gold, he nonetheless prefers the latter because "central banks are always adding" and he'd "rather be long the big idea rather than an auxiliary one."

At this stage, Brumby Capital, named after the feral horses roaming Australia's outback, is a relatively modest size but Clark's of the opinion that the way hedge funds invest must change and this will benefit the high conviction, more concentrated strategies he deploys.

Multi-strategy hedge funds - or pod shops as they are known - rely on leverage to boost the few out-of-consensus trades they have. In the period past when capital was cheap and plentiful, this model worked, but if Clark's right and rates are structurally higher going forward ,then this strategy will be less successful.

Despite the perma-bear reputation, Clark tries to keep his fund's positioning relatively flat. Having studied Asian economics, Clark focuses a lot on Japan and many of the bullish bets he places are located here. He wrote on his Substack account recently: "I don't have many longs but half of them have been in Japan." While he declined to name any companies in particular, he mentioned Japanese regional banks as a place he's invested.

The yen's (USDJPY) weakness makes Japan a cheap destination for foreign direct investment and he cites as an example the new Taiwan Semiconductor $(TSM)$ site in Kumamoto Prefecture to manufacture 3-nanometer chips that is just starting construction.

Areas of complacency

Clark identifies four signals that indicate investors are complacent about how much risk is present in markets: very tight credit spreads, cheap forex options, elevated sentiment and low cash balances among money managers.

Stock prices are rising along with confidence they'll keep rising.

Given his views on the cost of capital, one could be forgiven for expecting a trader with Clark's profile to be bearish on AI plays but that isn't the case. Clark well remembers the dot-com bubble of 2000-2002 and it's his belief that now, as then, it is the companies able to stay the course and invest through the cycle that will, like Amazon (AMZN) did, emerge triumphant.

One area where Clark is bearish, however, is private equity. He recently posted on Substack his views about how "the market has been reassessing the creditworthiness of software investments" and ""like with all things private equity - it's not that transparent". Clarke posits: "we know there are problems out there" and he interprets recent weakness in private equity plays like KKR $(KKR)$ as representative.

-Jules Rimmer

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February 24, 2026 03:29 ET (08:29 GMT)

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