Short-sellers have come under pressure especially after the collapse of Lehman Brothers as regulators and politicians blamed them for wrecking the financial markets.
Mark Lyttleton, fund manager at BlackRock, says short selling is essential in bringing returns, especially in absolute return strategy.
“Unless you have the ability to short, it is very difficult to make money in absolute terms. It is easy to say it but it’s a bit harder to do it,” he told a briefing.
In Lyttleton’s words, his fund — UK Absolute Alpha Fund — is run in the following way. “Day to day I’m walking in the forest. There are some trees that are big. In the wrong part of the forest, there are trees that have got rot, not getting enough water… They are the trees you want to short.”
But short sellers have come across hard challenges. “When we launched the fund, we wanted the fund to be bullet-proof. But we didn’t think how many bullets (would be fired at us). But the fund withstood that,” he says.