Today we are examining short positions in UK financial companies taken by Steven Heinz and Paul Ruddock's hedge fund Lansdowne Partners. Currently, it has four shorts: Old Mutual (OML), Legal & General (LGEN), Prudential Plc (PUK), and Aviva (AV). Kindly note that Prudential is a company based in the UK, not to be confused with the US company of the same name.
Over the last few months, we have highlighted Lansdowne's short position in Prudential several times during the period when Prudential attempted to buy AIG's (AIG) Asian business arm, AIA. This position has received a lot of attention from the financial media, as many argued Prudential was overpaying for AIA. Lansdowne's short thesis seems to extend beyond the AIA bid though, because the fund held the position many months before the bid was even made, and has not completely covered the short, even after Prudential's bid failed.
Currently, Lansdowne's short of Prudential Plc stands at -1.18% of shares outstanding. It previously was short to the tune of -1.46% of shares back on May 5th, 2010, so the fund has covered a partial position but still maintains quite a hefty bet. As you'll see from our examination of Heinz and Ruddock's other shorts, Lansdowne tends to hold its shorts for longer periods of time.
All of the short positions listed below are currently still open. Disclosure rules on short positions in UK financial companies state that fund managers who are net short a UK financial sector company are required to disclose the position if it is greater than 0.25% of the firm's issued share capital. In addition, the hedge fund must disclose each time it increases the short by 0.1% of issued share capital. Also, it must disclose when the position falls below the 0.25% threshold. For a full list of companies deemed "financial sector companies," head to the FSA website.
While these regulations are obviously tedious for the hedge funds themselves, it's a prime example of how UK governing bodies are increasing regulation, and it's interesting to compare it to the SEC's requirements. The UK is more 'fun' for Market Folly because it reveals short positions of various hedge funds and we get to highlight these positions. In the United States, these positions are closely guarded and rarely revealed, so it will be intriguing to see if the SEC steps up regulatory requirements regarding public disclosure of short positions. Over a year ago, we highlighted how rampant public disclosure of short positions could possibly be a bad idea. But at the same time, increased regulation is definitely needed, so maybe a compromise would be revealing shorts to the governing bodies, but not releasing them publicly. That is an entirely separate debate that we'll save for another time.
Turning back to hedge fund Lansdowne Partners' short positions, we see that it has been short the insurance company Legal and General for well over a year. This is not the first time this company has appeared in our hedge fund portfolio tracking series either. Back in May, we saw that Ken Griffin's investment firm Citadel was short Legal and General as well. Since then though, Citadel have reduced the position under the 0.25% threshold. Below are tables breaking down Lansdowne's various short positions:
Legal & General
- February 6th, 2009: Lansdowne was short -0.47% of shares
- August 26th, 2009: They increased their short to -1.16%
- November 12th, 2009: Increased to -1.76%
- June 11th, 2010: Reported as -1.02%
- February 18th, 2009: Lansdowne was short -0.39% of shares
- April 20th, 2009: -0.75%
- May 7th, 2009: -0.51%
- October 13th, 2009: -0.41%
- November 27th, 2009: -0.49%
- May 22nd, 2009: -0.95%
- December 10th, 2009: -0.79%
- December 15th, 2009: -0.43%
- April 26th, 2010: -0.97%
- May 5th, 2010: -1.46%
- May 28th, 2010: -1.18%
- February 13th, 2009: -0.34%
- March 26th, 2010: fell below the 0.25% threshold
- June 11th, 2010: -0.49%
So, after previously covering the majority of its short in Aviva back in March, Lansdowne has re-shorted the name. And, as you can tell from above, Lansdowne typically holds its core short positions for an extensive period of time, trading around partial positions in the mean time.
Last month, Lansdowne's UK Equity Fund was -3.98% for May but still up 0.67% for the year, as detailed in our May hedge fund performance update. You can view our coverage of Lansdowne's new longs here as well as our posts on other hedge fund UK positions.
Disclosure: No positions