Lansdowne Partners usually does well in its short portfolio, at least better than most long/short equity hedge funds. However if the fund’s short book based in financials is seen separately, the returns are seriously lagging this year. It should be remembered that Lansdowne is one of those funds whose timely short bets in insurers and banks at the time of financial crisis in 2008 raked in big profits for the hedge fund. The firms bets against Barclays plc (NYSE:BCS) (LON:BARC), Bradford & Bingley and HBOS were executed over multiple years, and the fund patiently waited for the worst to happen. So even if Lansdowne is not doing so well right now in its short picks in financials, we know that it likes to stick in for the long haul. Lansdowne’s Developed Markets fund is managed by Stuart Roden and Pete Davies. The firm was founded by Sir Paul Ruddock and Steven Heinz.
Lansdowne reestablishes short in Prudential Financial
After having no luck with shorting Prudential Financial Inc (NYSE:PRU) earlier in the year, Lansdowne Partners covered the short in the first quarter. However in June, the fund reestablished the position and now holds 0.5% of Prudential’s shares short. At present the position equals $182 million in market value. In the Q1 letter, Lansdowne intimated to its investors that it still believed in its fundamental analysis of the company, but due to meaningful losses in the position they were wrapping it up. Lansdowne has maintained a short in Prudential since 2009.
In its Q1 letter released in April, Lansdowne said that by maintaining a neutral position in the company they would be in a better position to judge as to when would be a good time to re-enter the short bet. The short was disclosed again at the end of June and PRU shares are up 8% since then, overall PRU is up 50% YTD.
Some big names of the hedge fund industry have made long bets in Prudential are Rob Citrone’s Discovery Capital which owns 5.5 million shares, Diamond Hill Capital at 3.8 million, and David Tepper’s Appaloosa Management, which holds 1.7 million shares of the company.
Lansdowne losing in Bank of Ireland short
As of July 2, Lansdowne has a negative bet in Bank of Ireland (NYSE:IRE), which amounts to 0.7% of outstanding shares or $62 million. Since June, when Lansdowne disclosed a bearish bet in the Irish bank, shares of IRE have traded up 25%.
Some hedge funds have bet in favor of Bank of Ireland (NYSE:IRE) and it seems like it is a favorite among quant funds, including Millennium Management, Citadel Advisors and Rennaissance Technologies, all of which have a position in the bank. Wilbur Ross has called Bank of Ireland one his best bets.
Lansdowne shorts another insurer
Lansdowne Partners has also revealed a negative bet in Direct Line Insurance Group PLC (LON:DLG), another insurer. For now Lansdowne’s short in Direct Line amounts to 0.52% of outstanding shares which equals $26 million. Lansdowne’s rival hedge fund, Henderson Global Investors, has a long position in 7.4 million shares of Direct Line Insurance Group PLC (LON:DLG) which equals 0.5% of equity. For the year, Direct Line’s shares have traded flat. An interesting piece of information here is that Prudential Investment LLC, which is a subsidiary of Prudential Financial, holds a small stake in Direct Line. The investment manager owns 4.1 million shares of the insurer whereas Prudential Financial itself also owns 2 million shares of Direct Line.
Another financial that Lansdowne is betting against is Provident Financial plc (LON:PFG), which provides small loans in the U.K. and Ireland. The fund’s short position amounts to $95 million and was disclosed in November of last year. For this year PFG has gained 30%, so Lansdowne has been losing on this bet as well.
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