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Telegraph.co.uk - EU data shows that Philip Falcone, the US hedge fund baron who led the assault on HBOS, has sold short €138m (£108m) of Banco Popular’s shares, or 1.65pc of the total float, through his fund Harbinger Capital.
He has short bets of €208m on Santander and €185m on BBVA. Blue Ridge Capital has targeted Bankinter and Popular. Calypso Capital Management, High Side Capital, Landsdowne, and Belgium’s Fortelus have all joined the hunt.
The Madrid positions are a way for funds to continue shorting banks in Britain, where Santander is now a key player after taking over Abbey National, Alliance & Leicester and Bradford & Bingley.
Britain’s Financial Services Authority has suspended short selling of bank stocks, but Spain has not done so.
Times Online - The Tory party conference got off to an embarrassing start today after it emerged that the Conservatives have taken large donations from hedge-fund managers whose firms made vast sums of money from taking bets in some of Britain’s crisis-hit banks.
David Cameron, the Tory leader, has accepted almost £2m from hedge-fund managers who took bets on banks such as Halifax Bank of Scotland, which was forced into an emergency rescue by Lloyds TSB, and Bradford & Bingley, which is itself on the brink of collapse.
The practise of taking down bets on shares, known as short-selling, has now been temporarily banned by the Financial Services Authority, the City watchdog, for all bank stocks. However the revelations will be particularly embarrassing for Mr Cameron and George Osborne, his shadow Chancellor, since they both specifically declined to criticise the activity earlier this month.
A string of the hedge funds have been offered membership of an exclusive dining club reserved for backers who give £50,000 or more to the Conservative party.
Guardian.co.uk - The Tories were accused last night of being bankrolled by a City ‘wolf pack’ after it emerged that the party was receiving hundreds of thousands of pounds from hedge fund managers who have been making vast sums of money from plunging bank shares.
After the Financial Services Authority had, in effect, barred the controversial practice of short-selling bank stocks and the Treasury was forced to draw up a rescue package for Bradford and Bingley, it emerged that a small group of City financiers who have made fortunes from falling stock markets are paying at least £50,000 a year to the party.
Their donations entitle them to membership of an elite supporters club called the Leaders Group, which bestows invitations to functions attended by David Cameron, something that has prompted allegations that the Tory leader is supporting ‘cash for access’. Last night, in an attempt to quell a mounting row over the party’s finances ahead of this week’s conference, the party put details of the Leaders Group on its website.
It has also emerged the Conservatives have continued to receive money from Lord Laidlaw, a Monaco-based tax exile who has given the party more than £3m. One donation came after the fact that he had taken part in orgies with prostitutes was exposed in the tabloids.
Irish Times - Seven international hedge funds have bet hundreds of millions of euro that Irish bank stocks will continue to fall.
Although it is normal stock market practice, since last Friday short-selling of the four Irish publicly quoted banks has been banned by the Irish Financial Services Regulatory Authority. While the regulator banned investors from taking new short positions, existing positions can be maintained, reduced or closed.
By maintaining their positions, the hedge funds are betting that Irish bank stocks, already at record lows, are set to fall further. As it is not clear when the initial share trades took place, brokers said the actual monetary value of the bets is unclear.
However, using yesterday’s closing prices, the seven funds hold positions worth €279 million in the four quoted Irish banks.
Five US and two London-based funds have disclosed their short positions.
Reuters UK - The hedge fund industry’s trade-of-the-moment — betting on falling financial stocks and rising commodities — is set to offer further profits, despite July’s setback, but managers may have to alter their tactics.
Hedge funds may well profit from betting July’s bounce in battered financial stocks and decline in commodities was only a blip in a longer-term trend, since the fundamental reasons for disliking bank stocks and holding commodities remain intact.
However, with investors nervously watching every piece of performance data, many funds have had to scale back the size of these bets to avoid further poor numbers — or are taking bets likely to be less painful if markets go against them.
Times Online - The fashionable investment tactic of the past month - buying bank stocks while selling energy companies - could already have gone too far, Merrill Lynch, the financial management group, warned clients yesterday.
In mid-July, hedge funds, pension funds and other institutional investors dramatically reversed their enthusiasm for energy stocks and loathing for financials in an abrupt about-turn that sent bank shares soaring and oil and gas companies sinking.
But Merrill said yesterday that the unwinding of the classic bet of the credit crunch may already have been overdone, giving warning that banks across Europe could still be forced to raise between $70 billion (£37 billion) and $120 billion in new equity on top of the $120 billion already raised. Barclays and HBOS looked most vulnerable among UK banks to having to go back to their shareholders for more equity on top of the £4.5 billion and £4 billion, respectively, already raised.
Irish Independant - The fund manager who predicted that the credit crunch would rip a hole through the banking sector has been rewarded with £28m (€35m) in pay and bonuses.
Crispin Odey trousered the bulk of the profits made by his Odey Asset Management Group after a hugely successful year with profits soaring from £16m to £55m. Mr Odey, 49, the founder, paid himself £28m. His 11 partners shared the other £27m.
The performance was driven by the flagship hedge fund Odey European Inc, which generated returns of 55 per cent, and is up 15 per cent in the first half of 2008. Launched in 1992, it is one of the longest established hedge funds in Europe, delivering an annual average return of 14.2 per cent.
The fund made millions from the risky practice of going short on bank stocks - selling shares not already owned in the hope they can be bought back at a lower price later. David Stewart, chief executive officer for Odey Asset Management, said: "We went short of banks and financials because we expected them to have a difficult time. We were long of agricultural and other commodity companies which did well and helped to boost overall performance."