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Long and Short of it: Hedge Fund Conspiracy Doesn't Add Up.

Updated: Oct 4, 2019

For reasons only known to themselves, Byline Times don’t seem to have retweeted their correction to their article, which initiated a "Boris backers are taking short positions on a no-deal Brexit" conspiracy: “Byline Times has approached two independent statistical and financial experts with our underlying data researched over many months to understand why others cannot reproduce our results. They cannot detect any upturn in short positions over the summer so we have removed that section…“ So, basically, the months of meticulous research that Byline Times said they put into this article produced a wholly inaccurate portrayal. “However, the general frequency of short positions around the Johnson leadership campaign is not the main revelation of this article, and both the volume of hedge fund and city donors contributing to his leadership campaign, and the short interest positions of their related firms remains uncontested.” How does a short position cause more of a conflict of interest than a long position? Having a short position is just a standard feature of many active fund management strategies. The normal operation of a fund manager does not create a conflict of interest, surely? Let's look at the activities of one of the prominent fund managers whose name crops up regularly, Crispin Odey. Now, if you cast your mind back to March, there was uncertainty as to whether Theresa May would be able to get her deal finally through,or whether we would leave without a deal, or even apply for an extension. We all know what happened next – Theresa May failed to get her deal through, failed to leave the EU on March 29th and left the Conservatives poll ratings plummeting and Theresa May in political trouble. At this point, and especially after the Brexit was delayed until October 31st instead of June 30th as Theresa May wanted, her position became impossible and the leadership hopefuls jockeyed for position. So what did Crispin Odey (actually Odey Asset Management) do between this date and Boris Johnson’s election? Presumably he took out vast short-positions and backed Boris to get us out without a deal? This is the short positions he actually changed in the period from March 29th to July 23rd: Increased AA plc from 0.63% to 0.98% Reduced Ashmore Group from 2% to 1.02% Reduced Auto Trader Group from 0.88% to 0.76% Increased BCA marketplace from 0.5% to 0.61% Reduced Berkeley Group from 0.80% to 0.73% Reduced Bunzl plc from 0.54% to 0.48% Reduced Hargreaves Lansdown from 0.51% to 0.49% Increased IG Group from 0.47% to 0.79% Increased Intu Properties from 3.14% to 3.48% Increased Jupiter from 1.14% to 1.22% Reduced Just Eat from 0.79% to 0.63% Increased Lancashire Holdings from 5.03% to 5.21% Reduced Metro Bank from 3.51% to 3.10% Increased short position in RDI REIT from 0.51% to 0.70% Reduced short position in Royal Mail from 1% to 0.91% Increased short position in Tullow Oil from 0.45% to 0.55% So he increased his short positions in 8 companies and reduced his short position in 8 companies. “Yeah, OK, I bet the value must have gone up by millions”. It didn’t. The value of the short positions changes, which as a caveat I have used current market cap to calculate, were: AA increased by £1.1M Ashmore reduced by £33.32M Auto Trader reduced by £5.4M BCA Marketplace Increased by £2.04M Berkeley Group reduced by £3.54M Bunzl reduced by $4.07M Hargreaves Lansdown reduced by £1.73M IG Group increased by £7.07M Intu Properties increased by £6.91M Jupiter Fund Management increased by £1.2M Just Eat reduced by £6.93M Lancashire Holdings increased by £2.59M Metro Bank reduced by £1.39M RDI REIT increased by £0.82M Royal Mail reduced by £1.8M Tullow Oil increased by £2.85M. So, not only did Odey not increase any more short positions than he reduced, the total value of his short positions from March 29th to July 23rd actually REDUCED by circa £33M! It should be pointed out for perspective that Odey has something like £5Billion under management – the majority of UK positions are currently in long positions. In short, the “Boris campaign was backed by hedge funds managers to make money from short positions” is, as with all the very best conspiracy theories, devoid of any factual basis whatsoever.

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