Banks Are Bearish, or Hedging, Financials and Real Estate

I recently visited the OwnershipAnalyzer.com site and did a little poking around to see who might be the largest investors in various ETFs.

It is interesting to note that the largest institutional holder in the ProShares Ultra-Short Financials (SKF) is the European bank UBS (UBS), which at the end of the first quarter of 2008 owned over 318,000 shares.

UBS is not alone. Other financial institutions on the list of owners, albeit with much smaller stakes, include Oppenheimer (OPY) (not surprising since Oppenheimer is the home of the bank-bashing analyst Meredith Whitney), Jefferies (JEF) and AIG (AIG) among others.

Were these banks just hedging or taking a bearish stance on their own industry?

Even more extensive is the list of banks making bearish bets on real estate. In this case the ProShares Ultra-Short Real Estate ETF (SRS) is the chosen vehicle. On the list of institutional holders of this ETF we see positions held by Deutsche Bank (DB), Credit Suisse (CS), UBS, Citigroup (C), Goldman Sachs (GS), Merrill Lynch (MER), Jefferies, Wells Fargo (WFC), Bear Stearns and others.

Even as many of these financial institutions claimed the worst was over and the stock market began its climb to the May high, these companies were apparently expecting more negative fallout from the financial and real estate sectors and were positioning themselves accordingly.

I guess you can't fault them for trying to make money, even if it contradicts their public statements.

Comments

[bluesmoke:]

Sounds about right - "Do as I say, not as I do". What in real estate are they shorting, commercial, residential, international etf's or REIT's ?

2008 Jul 02 10:44 AM

[Trade Radar...:]

bluesmoke -

The ProShares Ultra-Short Real Estate ETF is basically an inverse REIT which implies the banks are primarily betting against U.S. commercial real estate.

2008 Jul 02 11:45 AM

[tl:]

Wait a second. Your article states that the institutions' holdings were as of the end of first quarter 2008. Yet you also point out the May highs. How can you be sure that the banks did not pare down their holdings of SKF and SRS between the end of March of mid May?

2008 Jul 03 11:03 AM

[hf_guy:]

Don't believe everything you read from sites like the one you mention. If you do a holders search for SKF on a Bloomberg terminal you will see a much more exhaustive list than the one that comes up on OwnershipAnalyzer.com. The banks are not the only ones using the ProShares products. The largest institutional holder in SKF is actually a hedge fund called Harbinger Capital. They own about 25% of the outstanding shares. Check the 13F filing for them and you will see what I am talking about.

2008 Jul 05 10:41 PM