The Australian – Some of the City of London’s shrewdest hedge fund investors, who made millions of pounds betting that UK bank shares would fall, have turned their guns on insurers amid heightened worry about the financial strength of the sector

Lansdowne Partners, which spent three years gambling on the collapse of Northern Rock, and made huge profits when the bet paid off in the fourth year, has gambled tens of millions that the share prices of four household-name insurance companies will fall.

Lansdowne, founded in 1998 by Paul Ruddock and Steven Heinz, has disclosed that it had a short position in Prudential, Britain’s No 2 insurer, worth about £10.5 million ($24 billion); a £26.2 million bet against Aviva, owner of Norwich Union; and further gambles against Legal & General (L&G) and Old Mutual. With the exception of the Pru, insurers’ shares have continued to fall.

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Reuters UK – Funds of hedge fund portfolios are battening down the hatches in the current volatile markets by building up cash or steering clear of strategies with too much exposure to market movements.

With returns in the hedge fund industry hard to come by as the credit crisis continues to hit markets, managers who hold portfolios of hedge funds have become wary of strategies that could be caught out by another sharp downturn.

"These are the toughest conditions I’ve seen in 16 years," said Ken Kinsey-Quick, fund of hedge funds manager at Thames River Capital, who expects billions of dollars more of asset sales by banks.

"We’re expecting a big leg down in all financial assets … We do think in the short-term we don’t want much beta." Beta means exposure to overall market movements.

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