Sub-prime hedge fund king reveals UK bank shorts
US hedge fund manager John Paulson, whose company made triple digit returns last year by betting against sub-prime instruments, said today he “empathizes with financial firms” in dire straits, before revealing his own positions in four major UK banks are short, to profit if their share prices fall.
Paulson added in a regulatory statement: “Our short positions are taken on a passive basis—the success of which will be determined by the merits of the particular company.”
In regulatory filings required by UK regulator the Financial Services Authority, Paulson revealed the $35bn (€23.9bn) Paulson & Co. is shorting mortgage lender HBOS and its purchaser Lloyds TSB; Barclays, which is buying assets from bankrupt US investment bank Lehman Brothers; and peer Royal Bank of Scotland.
Paulson’s short positions range between 0.9% of the banks’ capitalisation in the case of Royal Bank of Scotland, and 1.8%, for Lloyds TSB.
Paulson declined to comment.
Paulson announced recently he was establishing a fund to help troubled banks recapitalise their balance sheets. However, his latest filings show he still sees value in being short.
The UK regulator on Tuesday received more applications from UK companies wanting their shares on its short-ban list, even after adding asset managers F&C and Aberdeen Asset Management.
The FSA’s list of shares, which managers cannot take new short positions in, or add to existing short positions of, now contains 34 names, up from its initial 30 when the ban took effect this past Friday.
Additions since then include asset managers Close Brothers Group, Investec, Rathbone Brothers and Schroders.
Notable by its absence was hedge fund Man Group. Resolution was removed.
A spokeswoman for the regulator said there was no set definition on the types of companies on the list and applications from companies for inclusion would be judged individually.
A source close to one of the funds shorting financial firms said: "Any investor who shorts these companies just doesn’t buy the argument that they’re in good shape. Along with any other money managers, we don’t believe that people shorting companies is the reason why companies’ stocks go down—they go down because of the fundamentals."
The source added: "These companies are under-capitalised and in desperate need to shore up their balance sheets. They also got involved in extremely complex instruments, which came back to burn them."
Other companies that revealed short positions in UK firms on the list included Eton Park, the fund established by Eric Mindich (shorting HBOS); Steadfast International, Samlyn Capital (each shorting mortgage provider Bradford & Bingley); and Blue Ridge Capital (shorting Alliance & Leicester).
del.icio.us
Digg
Newsvine
reddit
StumbleUpon
