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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Houston Chronicle – Hedge funds, historically an investment reserved for big-ticket investors, are seemingly like mutual funds in that they typically invest in stocks and bonds. They have the added glamour and allure, however, of taking significant risks and gambles with their investments. Hedge funds may take risks by purchasing derivatives, or they may bet on the fall in price of particular securities by selling the securities short. (When you short sell, you borrow a security from a broker, sell it and then hope to buy it back later at a lower price.) Some hedge funds even invest in other hedge funds.

Earlier this decade, hedge funds got lots of attention, and plenty of wealthier investors were throwing big bucks into them. The allure was hedge funds claiming to have sidestepped the bear market in the early 2000s.

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