Hedge funds seen switching short exposure to retail

Reuters UK – Hedge funds are likely to increase short exposure to retail stocks following a ban on short selling financial shares imposed by UK and U.S. regulators, industry insiders said on Friday.

Equity long/short and market neutral hedge funds will be among those most affected by the ban as short selling — betting the price of a share will fall — is a key component of their investment strategies.

Shorting financial stocks has been a popular trade among hedge funds this year, but now they will be forced to switch their attention to other sectors.

John Godden, of hedge fund consultant IGS Group, said: "Commodity and infrastructure providers are continuing to be strong and showing signs of growth going forward. Some service industries are likely to be pretty heavily hit by a slowdown so from a market neutral perspective, there’s your long and short sectors."

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