Money managers under the microscope
Shorting UK banks, it seems, is so last year.
Having profited from the implosion of the sector in 2008, many funds believe prices have fallen far enough, and in some cases are actually looking good value.
Outspoken star fund manager Crispin Odey this week revealed he’s now buying UK banks, having made money shorting them last year.
Instead, hedge funds have another sector in their crosshairs – insurers.
Many believe the sector will have to raise more capital or cut dividends. Figures from research group Data Explorers indicate increased shorting activity in the sector this month, albeit from a low base.
Hedge fund firm Lansdowne Partners has recently disclosed shorts in Legal & General, Aviva, Prudential and Old Mutual, while anecdotal evidence suggests others are taking similar bets.
After the battering that volatile markets and failed trades gave hedge funds last year, investors will surely welcome another potential source of returns.
But having imposed a temporary ban on shorting financials once, and threatened to reintroduce it without warning at any time, you can be sure the FSA will be monitoring any new shorting activity very closely indeed.