Hedge funds squeezed out by Tory share surge

IT’S HARD to know what Jeremy Corbyn might be more upset by – that Boris Johnson secured a hefty majority on Thursday or the thought that City bankers cashed in the following day as share prices soared.

But he’ll be pleased to know there were some losers in the Square Mile, particularly among some of the hedge funds he so despises.

Unlike normal investors which invest on behalf of pension funds and tend to hold shares for the long term, hedge funds take fewer, but far bolder, bets – often against individual companies.

So it will have come as a financial blow for those hedge funds which were betting against shares in companies which surged on Friday – including property companies, banks and those at risk of nationalisation under Labour, such as BT.

Some of them may even be squeezed out completely – forcing them to close their positions

– such was the size of some of the moves.

EasyJet’s shares jumped 8 per cent, hurting American short-sellers AQR Capital and Citadel. AQR has a £151million short position in the airline, while Citadel’s position is worth around £120 million.

AQR looks like the main victim of the surge, analysts at Breakout Point reckon.

It has the largest short position in Virgin Money, which jumped 19 per cent on Friday, and the largest single bet against water company Severn Trent, which was up 9 per cent.

But perhaps some had an inkling of a solid Tory win coming.

Data from IHS Markit shows that since the start of the month, around £1.5 billion was removed from short positions in FTSE100 companies.

There were still some £14billion of short bets on the table against blue-chip companies, but at least that will have helped to soften the blow.

MORE on the UK’s largest ever short position, which was revealed in last weekend’s Mail on Sunday.

The enormous bet against Premier Oil’s shares by Hong Kong hedge fund Asia Research & Capital Management – which is a hedge against its $380million

(£285 million) position in the North Sea oil firm’s debt – has caught the eye of regulators.

Why? Because it took it nearly three years to disclose its growing short position.

The Financial Conduct Authority said it was ‘aware of the matter’, but declined to comment further.

However, the hedge fund could be facing sanctions and even a fine for filing so late, I understand.