Hedge fund Marshall Wace makes record bet on Lloyds

ONE of Europe’s biggest hedge funds has made a record bet against Lloyds Banking Group, Britain’s largest high street bank, deemed as a bellwether for the economy.

Marshall Wace has taken a 0.51pc short position against the UK’S largest mortgage lender, the first bet of that size against Lloyds since disclosure rules were introduced in 2012, the Financial Times reported.

One source aware of the decision said it was a “stock-specific judgment” and not a general view of UK equities.

It is unclear how big Marshall Wace’s position was before its latest update, or which other banks it is betting against, although last year it targeted stricken challenger Metro Bank.

It has also made bets against retailer Asos and education publisher Pearson in recent years.

The London-based group’s founders Sir Paul Marshall and Ian Wace set up the hedge fund in 1997 and continue to run the company, which looks after around $45bn (£34bn) worth of assets.

Both men are worth around £640m, according to The Sunday Times Rich List. Shorting is a way of betting that a stock will fall in value. Investors do it by borrowing shares, selling them on and later buying them back at a lower price.

The technique is often used as protection against a market crash during times of uncertainty.

Shares in Lloyds – whose investors include around 2.4m ordinary households – have plunged this year as the economy went into freefall due to lockdown. As the UK’S largest high street bank, it is widely viewed as the most exposed to the performance of the country’s economy.

For the first half of the year, it fell to a £602m loss, down from a profit of £2.9bn a year ago, after setting aside £3.8bn to cover the cost of soured loans to families and businesses.

Spokesmen for Lloyds and Marshall Wace declined to comment.