Hedge fund shorts on UK equities jump 25% in 2020 - reports
25% increase on last year
Several high-profile hedge fund managers including Odey, Citadel, Lansdowne Partners, Marshall Wace and Millennium have added net short positions in FTSE 100 stocks to their portfolios during the first five months of 2020, according to a report by the Financial Times (FT), with short positions in UK firms having reached 1,569 among hedge funds during the first five months of the year.
The data, which was given to the Financial Conduct Authority (FCA) by ETF firm GraniteShares, found this was a 25% increase compared to the same period - between 2 January and 25 May - last year.
The minimum threshold for disclosing net short positions is 0.1%, although this was only reduced from 0.2% in April, meaning some smaller short positions may not have been included in the research.
The highest-conviction short position reported to the FCA was 16.7% of share capital of Premier Oil - a bet taken out by Hong Kong-based hedge fund manager Asia Research & Capital Management.
Premier Oil became embroiled in a dispute with the hedge fund firm earlier in the year over its plans to buy North Sea assets from BP, which led to the oil company's share price plummeting by 87% to 12.63p by the middle of March.
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Elsewhere, Odey Asset Management disclosed net short positions in Intu Properties, and Metro Bank of 3.6% each - with the former announcing it will likely breach covenants on its current debt as its Trafford Centre shopping complex continues to struggle amid the pandemic; and the latter having recently appointed a new CEO in February following higher-than-expected losses in 2019.
BlackRock has a 2.3% net short in J Sainsbury and 2.1% in struggling cruise ship company Carnival, while Janus Henderson has a 1.2% net short in British land and 1% in United Utilities.
William Rhind, founder and chief executive at GraniteShares, told the FT the increase in market volatility this year has led to some seeking protection against further falls, while others look to profit from share price falls.
"Looking ahead, various factors, including US-China relations, the looming US presidential election or the Brexit negotiations between the UK and EU, suggest that markets might continue to see heightened levels of volatility over the coming months," he said.
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