Short interest in European stocks increased from $24,154,156,685 in March of 2013 to $30,430,490,302 in 2014, while profits on those European short positions disclosed by hedge fund managers outperformed an equivalent short on the general markets in April. according to the most recent research from Novus.
Hedge fund shorts: Novus model portfolio down 1.19% vs 2.05%
The Novus model value-weighted portfolio based on public short positions in Europe lost 1.19% compared to a loss of 2.05% for a short on the iShares S&P Europe 350 Index (ETF) (NYSEARCA:IEV), including dividends.
Maverick Capital's flagship hedge fund lost -22.9% in the first quarter of 2022 according to a copy of the firm's quarterly update, which ValueWalk has been able to review. The firm's flagship fund, Maverick Fundamental Hedge, accounts for $3.7 billion of the group's $8.1 billion of assets under management. Even after losses in the first Read More
Managers short frauds, says Altshuller
“Managers are short potential frauds, and are making money on that,” said Stan Altshuller, Chief Research Officer at Novus. “Markets are showing signs of dispersion where poor quality names underperform and stock picking actually works. This is in contrast to the uniform melt up last year where managers have not been able to generate alpha shorting stocks.”
The top hedge funds with short positions in Europe during March were perennial shorts: Lansdowne Partners, followed by AQR Capital management, Odey Asset Management, Marshall Wace and BG master fund, all with total short positions exceeding $1 billion. The top stocks that were subject of the shorts included Gemalto NV (EPA:GTO) (OTCMKTS:GTOMY), Publicis Groupe S.A. (ADR) (OTCMKTS:PUBGY) (EPA:PUB), Volkswagen AG (ADR) (OTCMKTS:VLKAY) (ETR:VOW) and Glencore Xstrata PLC (LON:GLEN).
European Short Observer
Merger activity picking up helps hedge fund shorts
Merger activity is picking up and managers are participating by selling short acquiring companies.
The report noted that a short in France-based advertising company Publicis Groupe S.A. (ADR) (OTCMKTS:PUBGY) (EPA:PUB) worked for hedge funds as the company revealed hurdles to the announced merger with Omnicom, which cast doubt on the deal.
A stock that hurt fund managers most was Finland-based Metso Oyj (ADR) (OTCMKTS:MXCYY) (HEL:MEO1V), who announced a proposed merger which had three fund managers covering their short on the day of the news. Marshall Wace, on the other hand initiated short coverage the day after the merger was announced.
The largest increase in short interest, the report noted, was Innate Pharma SA (EPA:IPH) (OTCMKTS:IPHYF), a biopharmaceutical company whose shares dropped 30% over the month. Likewise, Quindell PLC (LON:QPP) (OTCMKTS:QUPPF) saw a 30% drop in its share price after a research report was published suggesting fraudulent activity. Other potential fraud related shorts, according to Novus, include Royal Imtech NV (AMS:IM) (OTCMKTS:IMTEF) and Blinkx Plc (LON:BLNX) (OTCMKTS:BLNKF).